Correlation Between Shandong Himile and Changjiang Publishing

Can any of the company-specific risk be diversified away by investing in both Shandong Himile and Changjiang 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 Himile and Changjiang Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Himile Mechanical and Changjiang Publishing Media, you can compare the effects of market volatilities on Shandong Himile and Changjiang 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 Himile with a short position of Changjiang Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Himile and Changjiang Publishing.

Diversification Opportunities for Shandong Himile and Changjiang Publishing

-0.56

Correlation Coefficient

Shandong Himile  Changjiang Publishing

Excellent diversification

The 3 months correlation between Shandong and Changjiang is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Himile Mechanical and Changjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Publishing and Shandong Himile 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 Himile Mechanical are associated (or correlated) with Changjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Publishing has no effect on the direction of Shandong Himile i.e., Shandong Himile and Changjiang Publishing go up and down completely randomly.

Pair Corralation between Shandong Himile and Changjiang Publishing

Assuming the 90 days trading horizon Shandong Himile Mechanical is expected to generate 1.26 times more return on investment than Changjiang Publishing. However, Shandong Himile is 1.26 times more volatile than Changjiang Publishing Media. It trades about 0.19 of its potential returns per unit of risk. Changjiang Publishing Media is currently generating about -0.11 per unit of risk. If you would invest  4,790  in Shandong Himile Mechanical on December 27, 2024 and sell it today you would earn a total of  1,012  from holding Shandong Himile Mechanical or generate 21.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shandong Himile Mechanical  vs.  Changjiang Publishing Media

Shandong Himile Mech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Himile Mechanical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Himile sustained solid returns over the last few months and may actually be approaching a breakup point.

Changjiang Publishing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changjiang Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong Himile and Changjiang Publishing

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

The idea behind Shandong Himile Mechanical and Changjiang 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.