Correlation Between Shandong Hongchuang and Qinghaihuading Industrial

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

Diversification Opportunities for Shandong Hongchuang and Qinghaihuading Industrial

-0.39

Correlation Coefficient

Shandong Hongchuang  Qinghaihuading Industrial

Very good diversification

The 3 months correlation between Shandong and Qinghaihuading is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hongchuang Aluminum and Qinghaihuading Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghaihuading Industrial 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 Qinghaihuading Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghaihuading Industrial has no effect on the direction of Shandong Hongchuang i.e., Shandong Hongchuang and Qinghaihuading Industrial go up and down completely randomly.

Pair Corralation between Shandong Hongchuang and Qinghaihuading Industrial

Assuming the 90 days trading horizon Shandong Hongchuang Aluminum is expected to generate 0.64 times more return on investment than Qinghaihuading Industrial. However, Shandong Hongchuang Aluminum is 1.56 times less risky than Qinghaihuading Industrial. It trades about 0.18 of its potential returns per unit of risk. Qinghaihuading Industrial Co is currently generating about -0.11 per unit of risk. If you would invest  735.00  in Shandong Hongchuang Aluminum on October 6, 2024 and sell it today you would earn a total of  162.00  from holding Shandong Hongchuang Aluminum or generate 22.04% return on investment over 90 days.

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

Shandong Hongchuang Aluminum  vs.  Qinghaihuading Industrial Co

Shandong Hongchuang

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 16 (%) 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.

Qinghaihuading Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qinghaihuading Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shandong Hongchuang and Qinghaihuading Industrial

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

The idea behind Shandong Hongchuang Aluminum and Qinghaihuading Industrial 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.