Correlation Between Shandong Mining and Iat Automobile

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

Diversification Opportunities for Shandong Mining and Iat Automobile

0.87

Correlation Coefficient

Shandong Mining  Iat Automobile

Very poor diversification

The 3 months correlation between Shandong and Iat is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Iat Automobile Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iat Automobile 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 Iat Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iat Automobile Technology has no effect on the direction of Shandong Mining i.e., Shandong Mining and Iat Automobile go up and down completely randomly.

Pair Corralation between Shandong Mining and Iat Automobile

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to generate 1.28 times more return on investment than Iat Automobile. However, Shandong Mining is 1.28 times more volatile than Iat Automobile Technology. It trades about 0.08 of its potential returns per unit of risk. Iat Automobile Technology is currently generating about 0.05 per unit of risk. If you would invest  368.00  in Shandong Mining Machinery on December 25, 2024 and sell it today you would earn a total of  55.00  from holding Shandong Mining Machinery or generate 14.95% return on investment over 90 days.

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

Shandong Mining Machinery  vs.  Iat Automobile Technology

Shandong Mining Machinery

Risk-Adjusted Performance

Modest

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

Iat Automobile Technology

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Shandong Mining and Iat Automobile

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

The idea behind Shandong Mining Machinery and Iat Automobile Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..