Correlation Between Shandong Mining and GRINM Semiconductor

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

Diversification Opportunities for Shandong Mining and GRINM Semiconductor

-0.12

Correlation Coefficient

Shandong Mining  GRINM Semiconductor

Good diversification

The 3 months correlation between Shandong and GRINM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and GRINM Semiconductor Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRINM Semiconductor 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 GRINM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRINM Semiconductor has no effect on the direction of Shandong Mining i.e., Shandong Mining and GRINM Semiconductor go up and down completely randomly.

Pair Corralation between Shandong Mining and GRINM Semiconductor

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to generate 1.81 times more return on investment than GRINM Semiconductor. However, Shandong Mining is 1.81 times more volatile than GRINM Semiconductor Materials. It trades about -0.06 of its potential returns per unit of risk. GRINM Semiconductor Materials is currently generating about -0.28 per unit of risk. If you would invest  423.00  in Shandong Mining Machinery on October 21, 2024 and sell it today you would lose (26.00) from holding Shandong Mining Machinery or give up 6.15% 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.  GRINM Semiconductor Materials

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.

GRINM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GRINM Semiconductor Materials 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 GRINM Semiconductor

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

The idea behind Shandong Mining Machinery and GRINM Semiconductor Materials 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.