Correlation Between Shandong Polymer and GEM

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

Diversification Opportunities for Shandong Polymer and GEM

0.62

Correlation Coefficient

Shandong Polymer  GEM

Poor diversification

The 3 months correlation between Shandong and GEM is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co 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 GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and GEM go up and down completely randomly.

Pair Corralation between Shandong Polymer and GEM

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to generate 1.4 times more return on investment than GEM. However, Shandong Polymer is 1.4 times more volatile than GEM Co. It trades about 0.08 of its potential returns per unit of risk. GEM Co is currently generating about 0.01 per unit of risk. If you would invest  430.00  in Shandong Polymer Biochemicals on December 24, 2024 and sell it today you would earn a total of  34.00  from holding Shandong Polymer Biochemicals or generate 7.91% return on investment over 90 days.

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

Shandong Polymer Biochemicals  vs.  GEM Co

Shandong Polymer Bio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 6 (%) 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 April 2025.

GEM Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GEM 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 Polymer and GEM

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

The idea behind Shandong Polymer Biochemicals and GEM 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.