Correlation Between Hunan TV and Shanghai Jinfeng

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

By analyzing existing cross correlation between Hunan TV Broadcast and Shanghai Jinfeng Wine, you can compare the effects of market volatilities on Hunan TV and Shanghai Jinfeng 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 Hunan TV with a short position of Shanghai Jinfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Shanghai Jinfeng.

Diversification Opportunities for Hunan TV and Shanghai Jinfeng

0.47

Correlation Coefficient

Hunan TV  Shanghai Jinfeng

Very weak diversification

The 3 months correlation between Hunan and Shanghai is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Shanghai Jinfeng Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jinfeng Wine and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Shanghai Jinfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jinfeng Wine has no effect on the direction of Hunan TV i.e., Hunan TV and Shanghai Jinfeng go up and down completely randomly.

Pair Corralation between Hunan TV and Shanghai Jinfeng

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to generate 1.51 times more return on investment than Shanghai Jinfeng. However, Hunan TV is 1.51 times more volatile than Shanghai Jinfeng Wine. It trades about 0.04 of its potential returns per unit of risk. Shanghai Jinfeng Wine is currently generating about -0.05 per unit of risk. If you would invest  726.00  in Hunan TV Broadcast on December 26, 2024 and sell it today you would earn a total of  33.00  from holding Hunan TV Broadcast or generate 4.55% return on investment over 90 days.

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

Hunan TV Broadcast  vs.  Shanghai Jinfeng Wine

Hunan TV Broadcast

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shanghai Jinfeng Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Jinfeng Wine 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 Hunan TV and Shanghai Jinfeng

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

The idea behind Hunan TV Broadcast and Shanghai Jinfeng Wine 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.