Correlation Between Huasi Agricultural and Shanghai Shibei

Can any of the company-specific risk be diversified away by investing in both Huasi Agricultural and Shanghai Shibei 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 Huasi Agricultural and Shanghai Shibei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huasi Agricultural Development and Shanghai Shibei Hi Tech, you can compare the effects of market volatilities on Huasi Agricultural and Shanghai Shibei 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 Huasi Agricultural with a short position of Shanghai Shibei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huasi Agricultural and Shanghai Shibei.

Diversification Opportunities for Huasi Agricultural and Shanghai Shibei

0.79

Correlation Coefficient

Huasi Agricultural  Shanghai Shibei

Poor diversification

The 3 months correlation between Huasi and Shanghai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and Shanghai Shibei Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shibei Hi and Huasi Agricultural 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 Huasi Agricultural Development are associated (or correlated) with Shanghai Shibei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shibei Hi has no effect on the direction of Huasi Agricultural i.e., Huasi Agricultural and Shanghai Shibei go up and down completely randomly.

Pair Corralation between Huasi Agricultural and Shanghai Shibei

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to under-perform the Shanghai Shibei. In addition to that, Huasi Agricultural is 1.19 times more volatile than Shanghai Shibei Hi Tech. It trades about 0.0 of its total potential returns per unit of risk. Shanghai Shibei Hi Tech is currently generating about 0.0 per unit of volatility. If you would invest  510.00  in Shanghai Shibei Hi Tech on October 10, 2024 and sell it today you would lose (68.00) from holding Shanghai Shibei Hi Tech or give up 13.33% of portfolio value over 90 days.

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

Huasi Agricultural Development  vs.  Shanghai Shibei Hi Tech

Huasi Agricultural

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Shibei Hi

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Shibei Hi Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Shibei may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Huasi Agricultural and Shanghai Shibei

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

The idea behind Huasi Agricultural Development and Shanghai Shibei Hi Tech 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.