Correlation Between Shandong Longquan and Jiangsu Phoenix

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

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

Diversification Opportunities for Shandong Longquan and Jiangsu Phoenix

-0.28

Correlation Coefficient

Shandong Longquan  Jiangsu Phoenix

Very good diversification

The 3 months correlation between Shandong and Jiangsu is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and Jiangsu Phoenix Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Phoenix Publ and Shandong Longquan 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 Longquan Pipeline are associated (or correlated) with Jiangsu Phoenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Phoenix Publ has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and Jiangsu Phoenix go up and down completely randomly.

Pair Corralation between Shandong Longquan and Jiangsu Phoenix

Assuming the 90 days trading horizon Shandong Longquan is expected to generate 2.28 times less return on investment than Jiangsu Phoenix. In addition to that, Shandong Longquan is 1.08 times more volatile than Jiangsu Phoenix Publishing. It trades about 0.02 of its total potential returns per unit of risk. Jiangsu Phoenix Publishing is currently generating about 0.04 per unit of volatility. If you would invest  765.00  in Jiangsu Phoenix Publishing on September 25, 2024 and sell it today you would earn a total of  337.00  from holding Jiangsu Phoenix Publishing or generate 44.05% return on investment over 90 days.

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

Shandong Longquan Pipeline  vs.  Jiangsu Phoenix Publishing

Shandong Longquan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longquan sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Phoenix Publ

Risk-Adjusted Performance

1 of 100

Insignificant

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

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

The idea behind Shandong Longquan Pipeline and Jiangsu Phoenix Publishing 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.