Correlation Between Emdoor Information and Shaanxi Broadcast

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

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

Diversification Opportunities for Emdoor Information and Shaanxi Broadcast

0.89

Correlation Coefficient

Emdoor Information  Shaanxi Broadcast

Very poor diversification

The 3 months correlation between Emdoor and Shaanxi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Emdoor Information Co and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast and Emdoor Information 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 Emdoor Information Co are associated (or correlated) with Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Emdoor Information i.e., Emdoor Information and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Emdoor Information and Shaanxi Broadcast

Assuming the 90 days trading horizon Emdoor Information Co is expected to generate 1.23 times more return on investment than Shaanxi Broadcast. However, Emdoor Information is 1.23 times more volatile than Shaanxi Broadcast TV. It trades about -0.01 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about -0.06 per unit of risk. If you would invest  6,792  in Emdoor Information Co on September 25, 2024 and sell it today you would lose (1,712) from holding Emdoor Information Co or give up 25.21% of portfolio value over 90 days.

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

Emdoor Information Co  vs.  Shaanxi Broadcast TV

Emdoor Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emdoor Information Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Emdoor Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Shaanxi Broadcast

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emdoor Information and Shaanxi Broadcast

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

The idea behind Emdoor Information Co and Shaanxi Broadcast TV 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.