Correlation Between Shengda Mining and Hygon Information

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

Diversification Opportunities for Shengda Mining and Hygon Information

0.21

Correlation Coefficient

Shengda Mining  Hygon Information

Modest diversification

The 3 months correlation between Shengda and Hygon is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and Hygon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hygon Information 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 Hygon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hygon Information has no effect on the direction of Shengda Mining i.e., Shengda Mining and Hygon Information go up and down completely randomly.

Pair Corralation between Shengda Mining and Hygon Information

Assuming the 90 days trading horizon Shengda Mining Co is expected to generate 0.5 times more return on investment than Hygon Information. However, Shengda Mining Co is 1.99 times less risky than Hygon Information. It trades about 0.24 of its potential returns per unit of risk. Hygon Information Technology is currently generating about 0.0 per unit of risk. If you would invest  1,210  in Shengda Mining Co on December 25, 2024 and sell it today you would earn a total of  367.00  from holding Shengda Mining Co or generate 30.33% return on investment over 90 days.

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

Shengda Mining Co  vs.  Hygon Information Technology

Shengda Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shengda Mining Co are ranked lower than 19 (%) 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.

Hygon Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hygon Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hygon Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shengda Mining and Hygon Information

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

The idea behind Shengda Mining Co and Hygon Information Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.