Correlation Between GEM and Shaanxi Meineng

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

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

Diversification Opportunities for GEM and Shaanxi Meineng

0.44

Correlation Coefficient

GEM  Shaanxi Meineng

Very weak diversification

The 3 months correlation between GEM and Shaanxi is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding GEM Co and Shaanxi Meineng Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Meineng Clean and GEM 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 GEM Co are associated (or correlated) with Shaanxi Meineng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Meineng Clean has no effect on the direction of GEM i.e., GEM and Shaanxi Meineng go up and down completely randomly.

Pair Corralation between GEM and Shaanxi Meineng

Assuming the 90 days trading horizon GEM is expected to generate 7.28 times less return on investment than Shaanxi Meineng. But when comparing it to its historical volatility, GEM Co is 1.21 times less risky than Shaanxi Meineng. It trades about 0.01 of its potential returns per unit of risk. Shaanxi Meineng Clean is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Shaanxi Meineng Clean on December 24, 2024 and sell it today you would earn a total of  67.00  from holding Shaanxi Meineng Clean or generate 5.33% return on investment over 90 days.

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

GEM Co  vs.  Shaanxi Meineng Clean

GEM Co

Risk-Adjusted Performance

Very Weak

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

Shaanxi Meineng Clean

Risk-Adjusted Performance

Insignificant

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

Pair Trading with GEM and Shaanxi Meineng

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

The idea behind GEM Co and Shaanxi Meineng Clean 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.