Correlation Between Shandong Hongchuang and Shanghai Yuyuan

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

Diversification Opportunities for Shandong Hongchuang and Shanghai Yuyuan

-0.43

Correlation Coefficient

Shandong Hongchuang  Shanghai Yuyuan

Very good diversification

The 3 months correlation between Shandong and Shanghai is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hongchuang Aluminum and Shanghai Yuyuan Tourist in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yuyuan Tourist 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 Shanghai Yuyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yuyuan Tourist has no effect on the direction of Shandong Hongchuang i.e., Shandong Hongchuang and Shanghai Yuyuan go up and down completely randomly.

Pair Corralation between Shandong Hongchuang and Shanghai Yuyuan

Assuming the 90 days trading horizon Shandong Hongchuang Aluminum is expected to generate 2.15 times more return on investment than Shanghai Yuyuan. However, Shandong Hongchuang is 2.15 times more volatile than Shanghai Yuyuan Tourist. It trades about 0.15 of its potential returns per unit of risk. Shanghai Yuyuan Tourist is currently generating about -0.13 per unit of risk. If you would invest  897.00  in Shandong Hongchuang Aluminum on December 26, 2024 and sell it today you would earn a total of  238.00  from holding Shandong Hongchuang Aluminum or generate 26.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shandong Hongchuang Aluminum  vs.  Shanghai Yuyuan Tourist

Shandong Hongchuang

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 11 (%) 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.

Shanghai Yuyuan Tourist

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Yuyuan Tourist has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong Hongchuang and Shanghai Yuyuan

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

The idea behind Shandong Hongchuang Aluminum and Shanghai Yuyuan Tourist 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 Stocks Directory module to find actively traded stocks across global markets.