Correlation Between Risesun Real and Shandong Longda

Can any of the company-specific risk be diversified away by investing in both Risesun Real and Shandong Longda 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 Risesun Real and Shandong Longda into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Risesun Real Estate and Shandong Longda Meat, you can compare the effects of market volatilities on Risesun Real and Shandong Longda 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 Risesun Real with a short position of Shandong Longda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Risesun Real and Shandong Longda.

Diversification Opportunities for Risesun Real and Shandong Longda

0.23

Correlation Coefficient

Risesun Real  Shandong Longda

Modest diversification

The 3 months correlation between Risesun and Shandong is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Risesun Real Estate and Shandong Longda Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longda Meat and Risesun Real 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 Risesun Real Estate are associated (or correlated) with Shandong Longda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longda Meat has no effect on the direction of Risesun Real i.e., Risesun Real and Shandong Longda go up and down completely randomly.

Pair Corralation between Risesun Real and Shandong Longda

Assuming the 90 days trading horizon Risesun Real Estate is expected to generate 2.21 times more return on investment than Shandong Longda. However, Risesun Real is 2.21 times more volatile than Shandong Longda Meat. It trades about 0.0 of its potential returns per unit of risk. Shandong Longda Meat is currently generating about -0.03 per unit of risk. If you would invest  220.00  in Risesun Real Estate on October 22, 2024 and sell it today you would lose (58.00) from holding Risesun Real Estate or give up 26.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Risesun Real Estate  vs.  Shandong Longda Meat

Risesun Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Risesun Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Risesun Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shandong Longda Meat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Risesun Real and Shandong Longda

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

The idea behind Risesun Real Estate and Shandong Longda Meat 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.