Correlation Between Shantui Construction and China Great

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

By analyzing existing cross correlation between Shantui Construction Machinery and China Great Wall, you can compare the effects of market volatilities on Shantui Construction and China Great 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 Shantui Construction with a short position of China Great. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantui Construction and China Great.

Diversification Opportunities for Shantui Construction and China Great

0.25

Correlation Coefficient

Shantui Construction  China Great

Modest diversification

The 3 months correlation between Shantui and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery and China Great Wall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Great Wall and Shantui Construction 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 Shantui Construction Machinery are associated (or correlated) with China Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Great Wall has no effect on the direction of Shantui Construction i.e., Shantui Construction and China Great go up and down completely randomly.

Pair Corralation between Shantui Construction and China Great

Assuming the 90 days trading horizon Shantui Construction Machinery is expected to generate 1.51 times more return on investment than China Great. However, Shantui Construction is 1.51 times more volatile than China Great Wall. It trades about 0.1 of its potential returns per unit of risk. China Great Wall is currently generating about 0.01 per unit of risk. If you would invest  454.00  in Shantui Construction Machinery on October 5, 2024 and sell it today you would earn a total of  531.00  from holding Shantui Construction Machinery or generate 116.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.34%
Values	Daily Returns

Shantui Construction Machinery  vs.  China Great Wall

Shantui Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantui Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

China Great Wall

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Great Wall has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shantui Construction and China Great

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

The idea behind Shantui Construction Machinery and China Great Wall 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.