Correlation Between Shanghai Metersbonwe and Changchun Faway

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Shanghai Metersbonwe and Changchun Faway 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 Shanghai Metersbonwe and Changchun Faway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Metersbonwe FashionAccessories and Changchun Faway Automobile, you can compare the effects of market volatilities on Shanghai Metersbonwe and Changchun Faway 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 Shanghai Metersbonwe with a short position of Changchun Faway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Metersbonwe and Changchun Faway.

Diversification Opportunities for Shanghai Metersbonwe and Changchun Faway

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Changchun is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Metersbonwe FashionAc and Changchun Faway Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun Faway Auto and Shanghai Metersbonwe 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 Shanghai Metersbonwe FashionAccessories are associated (or correlated) with Changchun Faway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun Faway Auto has no effect on the direction of Shanghai Metersbonwe i.e., Shanghai Metersbonwe and Changchun Faway go up and down completely randomly.

Pair Corralation between Shanghai Metersbonwe and Changchun Faway

Assuming the 90 days trading horizon Shanghai Metersbonwe FashionAccessories is expected to generate 2.42 times more return on investment than Changchun Faway. However, Shanghai Metersbonwe is 2.42 times more volatile than Changchun Faway Automobile. It trades about 0.21 of its potential returns per unit of risk. Changchun Faway Automobile is currently generating about 0.13 per unit of risk. If you would invest  158.00  in Shanghai Metersbonwe FashionAccessories on September 20, 2024 and sell it today you would earn a total of  83.00  from holding Shanghai Metersbonwe FashionAccessories or generate 52.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanghai Metersbonwe FashionAc  vs.  Changchun Faway Automobile

 Performance 
       Timeline  
Shanghai Metersbonwe 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Metersbonwe FashionAccessories are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Metersbonwe sustained solid returns over the last few months and may actually be approaching a breakup point.
Changchun Faway Auto 

Risk-Adjusted Performance

12 of 100

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

Shanghai Metersbonwe and Changchun Faway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Metersbonwe and Changchun Faway

The main advantage of trading using opposite Shanghai Metersbonwe and Changchun Faway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Metersbonwe position performs unexpectedly, Changchun Faway 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 Changchun Faway will offset losses from the drop in Changchun Faway's long position.
The idea behind Shanghai Metersbonwe FashionAccessories and Changchun Faway Automobile 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

Other Complementary Tools

CEOs Directory
Screen CEOs from public companies around the world
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Stocks Directory
Find actively traded stocks across global markets
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.