Correlation Between Shantui Construction and Ping An

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

Diversification Opportunities for Shantui Construction and Ping An

-0.53

Correlation Coefficient

Shantui Construction  Ping An

Excellent diversification

The 3 months correlation between Shantui and Ping is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shantui Construction Machinery and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Shantui Construction i.e., Shantui Construction and Ping An go up and down completely randomly.

Pair Corralation between Shantui Construction and Ping An

Assuming the 90 days trading horizon Shantui Construction is expected to generate 1.34 times less return on investment than Ping An. In addition to that, Shantui Construction is 1.57 times more volatile than Ping An Insurance. It trades about 0.04 of its total potential returns per unit of risk. Ping An Insurance is currently generating about 0.09 per unit of volatility. If you would invest  3,778  in Ping An Insurance on October 9, 2024 and sell it today you would earn a total of  1,239  from holding Ping An Insurance or generate 32.8% return on investment over 90 days.

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

Shantui Construction Machinery  vs.  Ping An Insurance

Shantui Construction

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 10 (%) 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.

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance 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 Shantui Construction and Ping An

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

The idea behind Shantui Construction Machinery and Ping An Insurance 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.