Correlation Between Shandong Mining and Chinese Universe

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

Diversification Opportunities for Shandong Mining and Chinese Universe

-0.35

Correlation Coefficient

Shandong Mining  Chinese Universe

Very good diversification

The 3 months correlation between Shandong and Chinese is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub 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 Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of Shandong Mining i.e., Shandong Mining and Chinese Universe go up and down completely randomly.

Pair Corralation between Shandong Mining and Chinese Universe

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the Chinese Universe. In addition to that, Shandong Mining is 2.83 times more volatile than Chinese Universe Publishing. It trades about -0.23 of its total potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.02 per unit of volatility. If you would invest  1,261  in Chinese Universe Publishing on October 5, 2024 and sell it today you would lose (17.00) from holding Chinese Universe Publishing or give up 1.35% of portfolio value over 90 days.

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

Shandong Mining Machinery  vs.  Chinese Universe Publishing

Shandong Mining Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 7 (%) 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.

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shandong Mining and Chinese Universe

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

The idea behind Shandong Mining Machinery and Chinese Universe Publishing 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.