Correlation Between Henan Shuanghui and Shanghai Suochen

Can any of the company-specific risk be diversified away by investing in both Henan Shuanghui and Shanghai Suochen 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 Henan Shuanghui and Shanghai Suochen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henan Shuanghui Investment and Shanghai Suochen Information, you can compare the effects of market volatilities on Henan Shuanghui and Shanghai Suochen 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 Henan Shuanghui with a short position of Shanghai Suochen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shuanghui and Shanghai Suochen.

Diversification Opportunities for Henan Shuanghui and Shanghai Suochen

0.51

Correlation Coefficient

Henan Shuanghui  Shanghai Suochen

Very weak diversification

The 3 months correlation between Henan and Shanghai is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and Shanghai Suochen Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Suochen Inf and Henan Shuanghui 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 Henan Shuanghui Investment are associated (or correlated) with Shanghai Suochen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Suochen Inf has no effect on the direction of Henan Shuanghui i.e., Henan Shuanghui and Shanghai Suochen go up and down completely randomly.

Pair Corralation between Henan Shuanghui and Shanghai Suochen

Assuming the 90 days trading horizon Henan Shuanghui is expected to generate 42.92 times less return on investment than Shanghai Suochen. But when comparing it to its historical volatility, Henan Shuanghui Investment is 4.53 times less risky than Shanghai Suochen. It trades about 0.02 of its potential returns per unit of risk. Shanghai Suochen Information is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,920  in Shanghai Suochen Information on December 26, 2024 and sell it today you would earn a total of  2,748  from holding Shanghai Suochen Information or generate 46.42% return on investment over 90 days.

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

Henan Shuanghui Investment  vs.  Shanghai Suochen Information

Henan Shuanghui Inve

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shuanghui Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Henan Shuanghui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Suochen Inf

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Suochen Information are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Suochen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henan Shuanghui and Shanghai Suochen

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

The idea behind Henan Shuanghui Investment and Shanghai Suochen Information 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.