Correlation Between Shandong Mining and RoadMain T

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

Diversification Opportunities for Shandong Mining and RoadMain T

-0.04

Correlation Coefficient

Shandong Mining  RoadMain T

Good diversification

The 3 months correlation between Shandong and RoadMain is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T 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 RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Shandong Mining i.e., Shandong Mining and RoadMain T go up and down completely randomly.

Pair Corralation between Shandong Mining and RoadMain T

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the RoadMain T. In addition to that, Shandong Mining is 1.4 times more volatile than RoadMain T Co. It trades about -0.4 of its total potential returns per unit of risk. RoadMain T Co is currently generating about -0.17 per unit of volatility. If you would invest  3,156  in RoadMain T Co on October 11, 2024 and sell it today you would lose (378.00) from holding RoadMain T Co or give up 11.98% 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.  RoadMain T Co

Shandong Mining Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 12 (%) 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.

RoadMain T

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RoadMain T Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RoadMain T 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 RoadMain T

The main advantage of trading using opposite Shandong Mining and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Mining position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Shandong Mining Machinery and RoadMain T Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.