Correlation Between Shandong Polymer and Shenzhen Noposion

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

By analyzing existing cross correlation between Shandong Polymer Biochemicals and Shenzhen Noposion Agrochemicals, you can compare the effects of market volatilities on Shandong Polymer and Shenzhen Noposion 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 Polymer with a short position of Shenzhen Noposion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Polymer and Shenzhen Noposion.

Diversification Opportunities for Shandong Polymer and Shenzhen Noposion

0.12

Correlation Coefficient

Shandong Polymer  Shenzhen Noposion

Average diversification

The 3 months correlation between Shandong and Shenzhen is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and Shandong Polymer 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 Polymer Biochemicals are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between Shandong Polymer and Shenzhen Noposion

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to under-perform the Shenzhen Noposion. In addition to that, Shandong Polymer is 1.07 times more volatile than Shenzhen Noposion Agrochemicals. It trades about -0.01 of its total potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about 0.06 per unit of volatility. If you would invest  538.00  in Shenzhen Noposion Agrochemicals on October 21, 2024 and sell it today you would earn a total of  463.00  from holding Shenzhen Noposion Agrochemicals or generate 86.06% return on investment over 90 days.

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

Shandong Polymer Biochemicals  vs.  Shenzhen Noposion Agrochemical

Shandong Polymer Bio

Risk-Adjusted Performance

4 of 100

Insignificant

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

Shenzhen Noposion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Polymer and Shenzhen Noposion

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

The idea behind Shandong Polymer Biochemicals and Shenzhen Noposion Agrochemicals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.