Correlation Between Shengda Mining and RoadMain T

Can any of the company-specific risk be diversified away by investing in both Shengda Mining and RoadMain T 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 RoadMain T 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 RoadMain T Co, you can compare the effects of market volatilities on Shengda Mining and RoadMain T 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 RoadMain T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengda Mining and RoadMain T.

Diversification Opportunities for Shengda Mining and RoadMain T

0.02

Correlation Coefficient

Shengda Mining  RoadMain T

Significant diversification

The 3 months correlation between Shengda and RoadMain is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T 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 RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Shengda Mining i.e., Shengda Mining and RoadMain T go up and down completely randomly.

Pair Corralation between Shengda Mining and RoadMain T

Assuming the 90 days trading horizon Shengda Mining Co is expected to under-perform the RoadMain T. But the stock apears to be less risky and, when comparing its historical volatility, Shengda Mining Co is 2.15 times less risky than RoadMain T. The stock trades about -0.5 of its potential returns per unit of risk. The RoadMain T Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,903  in RoadMain T Co on December 1, 2024 and sell it today you would lose (4.00) from holding RoadMain T Co or give up 0.14% of portfolio value over 90 days.

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

Shengda Mining Co  vs.  RoadMain T Co

Shengda Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shengda Mining Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shengda Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RoadMain T

Risk-Adjusted Performance

Very Weak

Over the last 90 days RoadMain T Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shengda Mining and RoadMain T

The main advantage of trading using opposite Shengda Mining and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shengda Mining position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Shengda Mining Co and RoadMain T Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.