Correlation Between Shandong Hongchuang and Miracll Chemicals

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Can any of the company-specific risk be diversified away by investing in both Shandong Hongchuang and Miracll Chemicals 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 Miracll Chemicals 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 Miracll Chemicals Co, you can compare the effects of market volatilities on Shandong Hongchuang and Miracll Chemicals 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 Miracll Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Hongchuang and Miracll Chemicals.

Diversification Opportunities for Shandong Hongchuang and Miracll Chemicals

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shandong and Miracll is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hongchuang Aluminum and Miracll Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miracll Chemicals 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 Miracll Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miracll Chemicals has no effect on the direction of Shandong Hongchuang i.e., Shandong Hongchuang and Miracll Chemicals go up and down completely randomly.

Pair Corralation between Shandong Hongchuang and Miracll Chemicals

Assuming the 90 days trading horizon Shandong Hongchuang Aluminum is expected to generate 1.59 times more return on investment than Miracll Chemicals. However, Shandong Hongchuang is 1.59 times more volatile than Miracll Chemicals Co. It trades about 0.45 of its potential returns per unit of risk. Miracll Chemicals Co is currently generating about -0.28 per unit of risk. If you would invest  682.00  in Shandong Hongchuang Aluminum on September 25, 2024 and sell it today you would earn a total of  215.00  from holding Shandong Hongchuang Aluminum or generate 31.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Shandong Hongchuang Aluminum  vs.  Miracll Chemicals Co

 Performance 
       Timeline  
Shandong Hongchuang 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 23 (%) 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.
Miracll Chemicals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Miracll Chemicals Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Miracll Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Hongchuang and Miracll Chemicals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shandong Hongchuang and Miracll Chemicals

The main advantage of trading using opposite Shandong Hongchuang and Miracll Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Hongchuang position performs unexpectedly, Miracll Chemicals 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 Miracll Chemicals will offset losses from the drop in Miracll Chemicals' long position.
The idea behind Shandong Hongchuang Aluminum and Miracll Chemicals Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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