Correlation Between Shaanxi Meineng and Eastern Communications

Can any of the company-specific risk be diversified away by investing in both Shaanxi Meineng and Eastern Communications 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 Shaanxi Meineng and Eastern Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaanxi Meineng Clean and Eastern Communications Co, you can compare the effects of market volatilities on Shaanxi Meineng and Eastern Communications 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 Shaanxi Meineng with a short position of Eastern Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Meineng and Eastern Communications.

Diversification Opportunities for Shaanxi Meineng and Eastern Communications

0.76

Correlation Coefficient

Shaanxi Meineng  Eastern Communications

Poor diversification

The 3 months correlation between Shaanxi and Eastern is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Meineng Clean and Eastern Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Communications and Shaanxi Meineng 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 Shaanxi Meineng Clean are associated (or correlated) with Eastern Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Communications has no effect on the direction of Shaanxi Meineng i.e., Shaanxi Meineng and Eastern Communications go up and down completely randomly.

Pair Corralation between Shaanxi Meineng and Eastern Communications

Assuming the 90 days trading horizon Shaanxi Meineng Clean is expected to generate 1.04 times more return on investment than Eastern Communications. However, Shaanxi Meineng is 1.04 times more volatile than Eastern Communications Co. It trades about -0.25 of its potential returns per unit of risk. Eastern Communications Co is currently generating about -0.34 per unit of risk. If you would invest  1,359  in Shaanxi Meineng Clean on October 6, 2024 and sell it today you would lose (152.00) from holding Shaanxi Meineng Clean or give up 11.18% of portfolio value over 90 days.

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

Shaanxi Meineng Clean  vs.  Eastern Communications Co

Shaanxi Meineng Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shaanxi Meineng Clean 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.

Eastern Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Communications Co 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 Shaanxi Meineng and Eastern Communications

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

The idea behind Shaanxi Meineng Clean and Eastern Communications Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.