Correlation Between Shandong Mining and Kuangda Technology

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

By analyzing existing cross correlation between Shandong Mining Machinery and Kuangda Technology Group, you can compare the effects of market volatilities on Shandong Mining and Kuangda Technology 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 Mining with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Mining and Kuangda Technology.

Diversification Opportunities for Shandong Mining and Kuangda Technology

0.67

Correlation Coefficient

Shandong Mining  Kuangda Technology

Poor diversification

The 3 months correlation between Shandong and Kuangda is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Shandong Mining 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 Mining Machinery are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Shandong Mining i.e., Shandong Mining and Kuangda Technology go up and down completely randomly.

Pair Corralation between Shandong Mining and Kuangda Technology

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to generate 1.29 times more return on investment than Kuangda Technology. However, Shandong Mining is 1.29 times more volatile than Kuangda Technology Group. It trades about 0.05 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.01 per unit of risk. If you would invest  228.00  in Shandong Mining Machinery on October 4, 2024 and sell it today you would earn a total of  125.00  from holding Shandong Mining Machinery or generate 54.82% return on investment over 90 days.

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

Shandong Mining Machinery  vs.  Kuangda Technology Group

Shandong Mining Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Kuangda Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kuangda Technology 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 Mining and Kuangda Technology

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

The idea behind Shandong Mining Machinery and Kuangda Technology Group 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.