Correlation Between Sinomine Resource and Shanghai Broadband

Can any of the company-specific risk be diversified away by investing in both Sinomine Resource and Shanghai Broadband 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 Sinomine Resource and Shanghai Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinomine Resource Exploration and Shanghai Broadband Technology, you can compare the effects of market volatilities on Sinomine Resource and Shanghai Broadband 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 Sinomine Resource with a short position of Shanghai Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomine Resource and Shanghai Broadband.

Diversification Opportunities for Sinomine Resource and Shanghai Broadband

-0.16

Correlation Coefficient

Sinomine Resource  Shanghai Broadband

Good diversification

The 3 months correlation between Sinomine and Shanghai is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sinomine Resource Exploration and Shanghai Broadband Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Broadband and Sinomine Resource 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 Sinomine Resource Exploration are associated (or correlated) with Shanghai Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Broadband has no effect on the direction of Sinomine Resource i.e., Sinomine Resource and Shanghai Broadband go up and down completely randomly.

Pair Corralation between Sinomine Resource and Shanghai Broadband

Assuming the 90 days trading horizon Sinomine Resource Exploration is expected to under-perform the Shanghai Broadband. But the stock apears to be less risky and, when comparing its historical volatility, Sinomine Resource Exploration is 1.79 times less risky than Shanghai Broadband. The stock trades about -0.09 of its potential returns per unit of risk. The Shanghai Broadband Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Shanghai Broadband Technology on December 28, 2024 and sell it today you would lose (18.00) from holding Shanghai Broadband Technology or give up 5.34% of portfolio value over 90 days.

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

Sinomine Resource Exploration  vs.  Shanghai Broadband Technology

Sinomine Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinomine Resource Exploration 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.

Shanghai Broadband

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sinomine Resource and Shanghai Broadband

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

The idea behind Sinomine Resource Exploration and Shanghai Broadband Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..