Correlation Between Hainan Shuangcheng and Chengtun Mining

Can any of the company-specific risk be diversified away by investing in both Hainan Shuangcheng and Chengtun Mining 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 Hainan Shuangcheng and Chengtun Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hainan Shuangcheng Pharmaceut and Chengtun Mining Group, you can compare the effects of market volatilities on Hainan Shuangcheng and Chengtun Mining 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 Hainan Shuangcheng with a short position of Chengtun Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Shuangcheng and Chengtun Mining.

Diversification Opportunities for Hainan Shuangcheng and Chengtun Mining

0.63

Correlation Coefficient

Hainan Shuangcheng  Chengtun Mining

Poor diversification

The 3 months correlation between Hainan and Chengtun is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Shuangcheng Pharmaceut and Chengtun Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengtun Mining Group and Hainan Shuangcheng 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 Hainan Shuangcheng Pharmaceut are associated (or correlated) with Chengtun Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengtun Mining Group has no effect on the direction of Hainan Shuangcheng i.e., Hainan Shuangcheng and Chengtun Mining go up and down completely randomly.

Pair Corralation between Hainan Shuangcheng and Chengtun Mining

Assuming the 90 days trading horizon Hainan Shuangcheng Pharmaceut is expected to under-perform the Chengtun Mining. In addition to that, Hainan Shuangcheng is 2.96 times more volatile than Chengtun Mining Group. It trades about -0.27 of its total potential returns per unit of risk. Chengtun Mining Group is currently generating about -0.09 per unit of volatility. If you would invest  493.00  in Chengtun Mining Group on October 9, 2024 and sell it today you would lose (17.00) from holding Chengtun Mining Group or give up 3.45% of portfolio value over 90 days.

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

Hainan Shuangcheng Pharmaceut  vs.  Chengtun Mining Group

Hainan Shuangcheng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan Shuangcheng Pharmaceut has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hainan Shuangcheng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chengtun Mining Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hainan Shuangcheng and Chengtun Mining

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

The idea behind Hainan Shuangcheng Pharmaceut and Chengtun Mining Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.