Correlation Between Shengda Mining and Uroica Mining

Can any of the company-specific risk be diversified away by investing in both Shengda Mining and Uroica Mining 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 Shengda Mining and Uroica Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shengda Mining Co and Uroica Mining Safety, you can compare the effects of market volatilities on Shengda Mining and Uroica Mining 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 Shengda Mining with a short position of Uroica Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengda Mining and Uroica Mining.

Diversification Opportunities for Shengda Mining and Uroica Mining

0.9

Correlation Coefficient

Shengda Mining  Uroica Mining

Almost no diversification

The 3 months correlation between Shengda and Uroica is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and Uroica Mining Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uroica Mining Safety and Shengda Mining 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 Shengda Mining Co are associated (or correlated) with Uroica Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uroica Mining Safety has no effect on the direction of Shengda Mining i.e., Shengda Mining and Uroica Mining go up and down completely randomly.

Pair Corralation between Shengda Mining and Uroica Mining

Assuming the 90 days trading horizon Shengda Mining is expected to generate 1.69 times less return on investment than Uroica Mining. But when comparing it to its historical volatility, Shengda Mining Co is 1.45 times less risky than Uroica Mining. It trades about 0.16 of its potential returns per unit of risk. Uroica Mining Safety is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Uroica Mining Safety on September 1, 2024 and sell it today you would earn a total of  237.00  from holding Uroica Mining Safety or generate 51.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.28%
Values	Daily Returns

Shengda Mining Co  vs.  Uroica Mining Safety

Shengda Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shengda Mining Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shengda Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Uroica Mining Safety

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Uroica Mining Safety are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Uroica Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shengda Mining and Uroica Mining

The main advantage of trading using opposite Shengda Mining and Uroica Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shengda Mining position performs unexpectedly, Uroica Mining 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 Uroica Mining will offset losses from the drop in Uroica Mining's long position.

The idea behind Shengda Mining Co and Uroica Mining Safety 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..