Correlation Between Unisplendour Corp and Shanghai Putailai

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

By analyzing existing cross correlation between Unisplendour Corp and Shanghai Putailai New, you can compare the effects of market volatilities on Unisplendour Corp and Shanghai Putailai 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 Unisplendour Corp with a short position of Shanghai Putailai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unisplendour Corp and Shanghai Putailai.

Diversification Opportunities for Unisplendour Corp and Shanghai Putailai

0.38

Correlation Coefficient

Unisplendour Corp  Shanghai Putailai

Weak diversification

The 3 months correlation between Unisplendour and Shanghai is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Unisplendour Corp and Shanghai Putailai New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Putailai New and Unisplendour Corp 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 Unisplendour Corp are associated (or correlated) with Shanghai Putailai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Putailai New has no effect on the direction of Unisplendour Corp i.e., Unisplendour Corp and Shanghai Putailai go up and down completely randomly.

Pair Corralation between Unisplendour Corp and Shanghai Putailai

Assuming the 90 days trading horizon Unisplendour Corp is expected to under-perform the Shanghai Putailai. In addition to that, Unisplendour Corp is 1.32 times more volatile than Shanghai Putailai New. It trades about -0.02 of its total potential returns per unit of risk. Shanghai Putailai New is currently generating about 0.11 per unit of volatility. If you would invest  1,623  in Shanghai Putailai New on December 28, 2024 and sell it today you would earn a total of  239.00  from holding Shanghai Putailai New or generate 14.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Unisplendour Corp  vs.  Shanghai Putailai New

Unisplendour Corp

Risk-Adjusted Performance

Very Weak

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

Shanghai Putailai New

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Putailai New are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Putailai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unisplendour Corp and Shanghai Putailai

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

The idea behind Unisplendour Corp and Shanghai Putailai New 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.