Correlation Between Shenyang Huitian and Shandong Homey

Can any of the company-specific risk be diversified away by investing in both Shenyang Huitian and Shandong Homey 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 Shenyang Huitian and Shandong Homey into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenyang Huitian Thermal and Shandong Homey Aquatic, you can compare the effects of market volatilities on Shenyang Huitian and Shandong Homey 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 Shenyang Huitian with a short position of Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Huitian and Shandong Homey.

Diversification Opportunities for Shenyang Huitian and Shandong Homey

0.83

Correlation Coefficient

Shenyang Huitian  Shandong Homey

Very poor diversification

The 3 months correlation between Shenyang and Shandong is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic and Shenyang Huitian 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 Shenyang Huitian Thermal are associated (or correlated) with Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and Shandong Homey go up and down completely randomly.

Pair Corralation between Shenyang Huitian and Shandong Homey

Assuming the 90 days trading horizon Shenyang Huitian Thermal is expected to generate 1.03 times more return on investment than Shandong Homey. However, Shenyang Huitian is 1.03 times more volatile than Shandong Homey Aquatic. It trades about -0.06 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about -0.09 per unit of risk. If you would invest  382.00  in Shenyang Huitian Thermal on December 1, 2024 and sell it today you would lose (49.00) from holding Shenyang Huitian Thermal or give up 12.83% of portfolio value over 90 days.

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

Shenyang Huitian Thermal  vs.  Shandong Homey Aquatic

Shenyang Huitian Thermal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenyang Huitian Thermal 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.

Shandong Homey Aquatic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Homey Aquatic 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 Shenyang Huitian and Shandong Homey

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

The idea behind Shenyang Huitian Thermal and Shandong Homey Aquatic 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.