Correlation Between Shantou Wanshun and Changchun

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

By analyzing existing cross correlation between Shantou Wanshun Package and Changchun UP Optotech, you can compare the effects of market volatilities on Shantou Wanshun and Changchun 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 Shantou Wanshun with a short position of Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Changchun.

Diversification Opportunities for Shantou Wanshun and Changchun

0.72

Correlation Coefficient

Shantou Wanshun  Changchun

Poor diversification

The 3 months correlation between Shantou and Changchun is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Changchun go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Changchun

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the Changchun. But the stock apears to be less risky and, when comparing its historical volatility, Shantou Wanshun Package is 1.13 times less risky than Changchun. The stock trades about -0.03 of its potential returns per unit of risk. The Changchun UP Optotech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,325  in Changchun UP Optotech on October 3, 2024 and sell it today you would earn a total of  1,447  from holding Changchun UP Optotech or generate 62.24% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Changchun UP Optotech

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Changchun UP Optotech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shantou Wanshun and Changchun

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

The idea behind Shantou Wanshun Package and Changchun UP Optotech 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.