Correlation Between Shandong Mining and Duzhe Publishing

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

Diversification Opportunities for Shandong Mining and Duzhe Publishing

0.81

Correlation Coefficient

Shandong Mining  Duzhe Publishing

Very poor diversification

The 3 months correlation between Shandong and Duzhe is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe 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 Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of Shandong Mining i.e., Shandong Mining and Duzhe Publishing go up and down completely randomly.

Pair Corralation between Shandong Mining and Duzhe Publishing

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the Duzhe Publishing. In addition to that, Shandong Mining is 1.36 times more volatile than Duzhe Publishing Media. It trades about -0.23 of its total potential returns per unit of risk. Duzhe Publishing Media is currently generating about 0.01 per unit of volatility. If you would invest  616.00  in Duzhe Publishing Media on October 5, 2024 and sell it today you would lose (5.00) from holding Duzhe Publishing Media or give up 0.81% of portfolio value over 90 days.

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

Shandong Mining Machinery  vs.  Duzhe 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.

Duzhe Publishing Media

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Shandong Mining Machinery and Duzhe 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.