Correlation Between HanS Laser and Shanghai Construction

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

By analyzing existing cross correlation between HanS Laser Tech and Shanghai Construction Group, you can compare the effects of market volatilities on HanS Laser and Shanghai Construction 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 HanS Laser with a short position of Shanghai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of HanS Laser and Shanghai Construction.

Diversification Opportunities for HanS Laser and Shanghai Construction

0.77

Correlation Coefficient

HanS Laser  Shanghai Construction

Poor diversification

The 3 months correlation between HanS and Shanghai is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HanS Laser Tech and Shanghai Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Construction and HanS Laser 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 HanS Laser Tech are associated (or correlated) with Shanghai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Construction has no effect on the direction of HanS Laser i.e., HanS Laser and Shanghai Construction go up and down completely randomly.

Pair Corralation between HanS Laser and Shanghai Construction

Assuming the 90 days trading horizon HanS Laser is expected to generate 7.4 times less return on investment than Shanghai Construction. In addition to that, HanS Laser is 1.41 times more volatile than Shanghai Construction Group. It trades about 0.0 of its total potential returns per unit of risk. Shanghai Construction Group is currently generating about 0.01 per unit of volatility. If you would invest  256.00  in Shanghai Construction Group on October 10, 2024 and sell it today you would lose (3.00) from holding Shanghai Construction Group or give up 1.17% of portfolio value over 90 days.

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

HanS Laser Tech  vs.  Shanghai Construction Group

HanS Laser Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shanghai Construction

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Construction Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HanS Laser and Shanghai Construction

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

The idea behind HanS Laser Tech and Shanghai Construction Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.