Correlation Between Cangzhou Mingzhu and Sinosteel Luonai

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Can any of the company-specific risk be diversified away by investing in both Cangzhou Mingzhu and Sinosteel Luonai 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 Cangzhou Mingzhu and Sinosteel Luonai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cangzhou Mingzhu Plastic and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Cangzhou Mingzhu and Sinosteel Luonai 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 Cangzhou Mingzhu with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cangzhou Mingzhu and Sinosteel Luonai.

Diversification Opportunities for Cangzhou Mingzhu and Sinosteel Luonai

CangzhouSinosteelDiversified AwayCangzhouSinosteelDiversified Away100%
0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cangzhou and Sinosteel is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cangzhou Mingzhu Plastic and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Cangzhou Mingzhu 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 Cangzhou Mingzhu Plastic are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Cangzhou Mingzhu i.e., Cangzhou Mingzhu and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Cangzhou Mingzhu and Sinosteel Luonai

Assuming the 90 days trading horizon Cangzhou Mingzhu is expected to generate 1.76 times less return on investment than Sinosteel Luonai. But when comparing it to its historical volatility, Cangzhou Mingzhu Plastic is 1.29 times less risky than Sinosteel Luonai. It trades about 0.09 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  329.00  in Sinosteel Luonai Materials on September 26, 2024 and sell it today you would earn a total of  80.00  from holding Sinosteel Luonai Materials or generate 24.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.33%
ValuesDaily Returns

Cangzhou Mingzhu Plastic  vs.  Sinosteel Luonai Materials

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 01020304050
JavaScript chart by amCharts 3.21.15002108 688119
       Timeline  
Cangzhou Mingzhu Plastic 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cangzhou Mingzhu Plastic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cangzhou Mingzhu sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3.23.43.63.844.24.4
Sinosteel Luonai Mat 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Luonai Materials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Luonai sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3.23.43.63.844.24.44.6

Cangzhou Mingzhu and Sinosteel Luonai Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.73-6.54-4.34-2.150.03652.264.66.949.2811.61 0.0200.0250.0300.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15002108 688119
       Returns  

Pair Trading with Cangzhou Mingzhu and Sinosteel Luonai

The main advantage of trading using opposite Cangzhou Mingzhu and Sinosteel Luonai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cangzhou Mingzhu position performs unexpectedly, Sinosteel Luonai 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 Sinosteel Luonai will offset losses from the drop in Sinosteel Luonai's long position.
The idea behind Cangzhou Mingzhu Plastic and Sinosteel Luonai Materials 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.
Check out your portfolio center.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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