Correlation Between Gansu Huangtai and Shanghai Material

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

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

Diversification Opportunities for Gansu Huangtai and Shanghai Material

0.44

Correlation Coefficient

Gansu Huangtai  Shanghai Material

Very weak diversification

The 3 months correlation between Gansu and Shanghai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Shanghai Material Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Material Trading and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Shanghai Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Material Trading has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Shanghai Material go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Shanghai Material

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to under-perform the Shanghai Material. In addition to that, Gansu Huangtai is 1.87 times more volatile than Shanghai Material Trading. It trades about -0.06 of its total potential returns per unit of risk. Shanghai Material Trading is currently generating about -0.04 per unit of volatility. If you would invest  1,035  in Shanghai Material Trading on December 26, 2024 and sell it today you would lose (45.00) from holding Shanghai Material Trading or give up 4.35% of portfolio value over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Shanghai Material Trading

Gansu Huangtai Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gansu Huangtai Wine marketing 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.

Shanghai Material Trading

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Gansu Huangtai and Shanghai Material

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

The idea behind Gansu Huangtai Wine marketing and Shanghai Material Trading 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..