Correlation Between Shandong Mining and Zhejiang Publishing

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

Diversification Opportunities for Shandong Mining and Zhejiang Publishing

0.16

Correlation Coefficient

Shandong Mining  Zhejiang Publishing

Average diversification

The 3 months correlation between Shandong and Zhejiang is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Zhejiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Publishing Media 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 Zhejiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Publishing Media has no effect on the direction of Shandong Mining i.e., Shandong Mining and Zhejiang Publishing go up and down completely randomly.

Pair Corralation between Shandong Mining and Zhejiang Publishing

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to generate 1.14 times more return on investment than Zhejiang Publishing. However, Shandong Mining is 1.14 times more volatile than Zhejiang Publishing Media. It trades about 0.04 of its potential returns per unit of risk. Zhejiang Publishing Media is currently generating about 0.02 per unit of risk. If you would invest  256.00  in Shandong Mining Machinery on October 5, 2024 and sell it today you would earn a total of  93.00  from holding Shandong Mining Machinery or generate 36.33% return on investment over 90 days.

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

Shandong Mining Machinery  vs.  Zhejiang Publishing Media

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.

Zhejiang Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Publishing Media 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 Zhejiang Publishing

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

The idea behind Shandong Mining Machinery and Zhejiang Publishing Media 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.