Correlation Between Shantui Construction and Changjiang Publishing

Can any of the company-specific risk be diversified away by investing in both Shantui Construction and Changjiang Publishing 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 Changjiang Publishing 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 Changjiang Publishing Media, you can compare the effects of market volatilities on Shantui Construction and Changjiang Publishing 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 Changjiang Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantui Construction and Changjiang Publishing.

Diversification Opportunities for Shantui Construction and Changjiang Publishing

-0.36

Correlation Coefficient

Shantui Construction  Changjiang Publishing

Very good diversification

The 3 months correlation between Shantui and Changjiang is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery and Changjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Publishing 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 Changjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Publishing has no effect on the direction of Shantui Construction i.e., Shantui Construction and Changjiang Publishing go up and down completely randomly.

Pair Corralation between Shantui Construction and Changjiang Publishing

Assuming the 90 days trading horizon Shantui Construction Machinery is expected to generate 2.15 times more return on investment than Changjiang Publishing. However, Shantui Construction is 2.15 times more volatile than Changjiang Publishing Media. It trades about 0.0 of its potential returns per unit of risk. Changjiang Publishing Media is currently generating about -0.16 per unit of risk. If you would invest  969.00  in Shantui Construction Machinery on December 28, 2024 and sell it today you would lose (21.00) from holding Shantui Construction Machinery or give up 2.17% of portfolio value over 90 days.

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

Shantui Construction Machinery  vs.  Changjiang Publishing Media

Shantui Construction

Risk-Adjusted Performance

Very Weak

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

Changjiang Publishing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changjiang Publishing Media 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shantui Construction and Changjiang Publishing

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

The idea behind Shantui Construction Machinery and Changjiang Publishing Media 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.