Correlation Between Hunan Investment and Shanghai Junshi

Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Shanghai Junshi at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hunan Investment and Shanghai Junshi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Investment Group and Shanghai Junshi Biosciences, you can compare the effects of market volatilities on Hunan Investment and Shanghai Junshi and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hunan Investment with a short position of Shanghai Junshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Shanghai Junshi.

Diversification Opportunities for Hunan Investment and Shanghai Junshi

0.5

Correlation Coefficient

Hunan Investment  Shanghai Junshi

Very weak diversification

The 3 months correlation between Hunan and Shanghai is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Shanghai Junshi Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Junshi Bios and Hunan Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hunan Investment Group are associated (or correlated) with Shanghai Junshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Junshi Bios has no effect on the direction of Hunan Investment i.e., Hunan Investment and Shanghai Junshi go up and down completely randomly.

Pair Corralation between Hunan Investment and Shanghai Junshi

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 1.86 times more return on investment than Shanghai Junshi. However, Hunan Investment is 1.86 times more volatile than Shanghai Junshi Biosciences. It trades about 0.09 of its potential returns per unit of risk. Shanghai Junshi Biosciences is currently generating about -0.07 per unit of risk. If you would invest  528.00  in Hunan Investment Group on September 22, 2024 and sell it today you would earn a total of  33.00  from holding Hunan Investment Group or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hunan Investment Group  vs.  Shanghai Junshi Biosciences

Hunan Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Junshi Bios

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Junshi Biosciences are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Junshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Investment and Shanghai Junshi

The main advantage of trading using opposite Hunan Investment and Shanghai Junshi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Investment position performs unexpectedly, Shanghai Junshi can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shanghai Junshi will offset losses from the drop in Shanghai Junshi's long position.

The idea behind Hunan Investment Group and Shanghai Junshi Biosciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.