Correlation Between Shandong Hongchuang and Tianjin LVYIN

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

By analyzing existing cross correlation between Shandong Hongchuang Aluminum and Tianjin LVYIN Landscape, you can compare the effects of market volatilities on Shandong Hongchuang and Tianjin LVYIN 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 Shandong Hongchuang with a short position of Tianjin LVYIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Hongchuang and Tianjin LVYIN.

Diversification Opportunities for Shandong Hongchuang and Tianjin LVYIN

0.41

Correlation Coefficient

Shandong Hongchuang  Tianjin LVYIN

Very weak diversification

The 3 months correlation between Shandong and Tianjin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hongchuang Aluminum and Tianjin LVYIN Landscape in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin LVYIN Landscape and Shandong Hongchuang 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 Shandong Hongchuang Aluminum are associated (or correlated) with Tianjin LVYIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin LVYIN Landscape has no effect on the direction of Shandong Hongchuang i.e., Shandong Hongchuang and Tianjin LVYIN go up and down completely randomly.

Pair Corralation between Shandong Hongchuang and Tianjin LVYIN

Assuming the 90 days trading horizon Shandong Hongchuang Aluminum is expected to generate 0.83 times more return on investment than Tianjin LVYIN. However, Shandong Hongchuang Aluminum is 1.21 times less risky than Tianjin LVYIN. It trades about 0.44 of its potential returns per unit of risk. Tianjin LVYIN Landscape is currently generating about -0.15 per unit of risk. If you would invest  755.00  in Shandong Hongchuang Aluminum on October 10, 2024 and sell it today you would earn a total of  232.00  from holding Shandong Hongchuang Aluminum or generate 30.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Shandong Hongchuang Aluminum  vs.  Tianjin LVYIN Landscape

Shandong Hongchuang

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Hongchuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin LVYIN Landscape

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin LVYIN Landscape are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tianjin LVYIN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shandong Hongchuang and Tianjin LVYIN

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

The idea behind Shandong Hongchuang Aluminum and Tianjin LVYIN Landscape 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..