Correlation Between Shandong Mining and National Silicon

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

Diversification Opportunities for Shandong Mining and National Silicon

-0.06

Correlation Coefficient

Shandong Mining  National Silicon

Good diversification

The 3 months correlation between Shandong and National is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry 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 National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Shandong Mining i.e., Shandong Mining and National Silicon go up and down completely randomly.

Pair Corralation between Shandong Mining and National Silicon

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the National Silicon. In addition to that, Shandong Mining is 2.85 times more volatile than National Silicon Industry. It trades about -0.23 of its total potential returns per unit of risk. National Silicon Industry is currently generating about -0.33 per unit of volatility. If you would invest  2,140  in National Silicon Industry on October 5, 2024 and sell it today you would lose (299.00) from holding National Silicon Industry or give up 13.97% 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.  National Silicon Industry

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.

National Silicon Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Silicon Industry 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 National Silicon

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

The idea behind Shandong Mining Machinery and National Silicon Industry 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.