Correlation Between Shandong Longquan and Sany Heavy

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

Diversification Opportunities for Shandong Longquan and Sany Heavy

0.45

Correlation Coefficient

Shandong Longquan  Sany Heavy

Very weak diversification

The 3 months correlation between Shandong and Sany is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy 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 Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and Sany Heavy go up and down completely randomly.

Pair Corralation between Shandong Longquan and Sany Heavy

Assuming the 90 days trading horizon Shandong Longquan Pipeline is expected to generate 0.99 times more return on investment than Sany Heavy. However, Shandong Longquan Pipeline is 1.01 times less risky than Sany Heavy. It trades about 0.02 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about -0.12 per unit of risk. If you would invest  448.00  in Shandong Longquan Pipeline on December 25, 2024 and sell it today you would earn a total of  4.00  from holding Shandong Longquan Pipeline or generate 0.89% return on investment over 90 days.

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

Shandong Longquan Pipeline  vs.  Sany Heavy Energy

Shandong Longquan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Longquan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sany Heavy Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sany Heavy Energy 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 Longquan and Sany Heavy

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

The idea behind Shandong Longquan Pipeline and Sany Heavy Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.