Correlation Between Shandong Rike and Eastroc Beverage

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

By analyzing existing cross correlation between Shandong Rike Chemical and Eastroc Beverage Group, you can compare the effects of market volatilities on Shandong Rike and Eastroc Beverage 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 Rike with a short position of Eastroc Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Rike and Eastroc Beverage.

Diversification Opportunities for Shandong Rike and Eastroc Beverage

-0.69

Correlation Coefficient

Shandong Rike  Eastroc Beverage

Excellent diversification

The 3 months correlation between Shandong and Eastroc is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Rike Chemical and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage and Shandong Rike 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 Rike Chemical are associated (or correlated) with Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of Shandong Rike i.e., Shandong Rike and Eastroc Beverage go up and down completely randomly.

Pair Corralation between Shandong Rike and Eastroc Beverage

Assuming the 90 days trading horizon Shandong Rike Chemical is expected to generate 2.08 times more return on investment than Eastroc Beverage. However, Shandong Rike is 2.08 times more volatile than Eastroc Beverage Group. It trades about 0.09 of its potential returns per unit of risk. Eastroc Beverage Group is currently generating about -0.01 per unit of risk. If you would invest  559.00  in Shandong Rike Chemical on December 26, 2024 and sell it today you would earn a total of  127.00  from holding Shandong Rike Chemical or generate 22.72% return on investment over 90 days.

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

Shandong Rike Chemical  vs.  Eastroc Beverage Group

Shandong Rike Chemical

Risk-Adjusted Performance

Modest

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

Eastroc Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastroc Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eastroc Beverage 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 Rike and Eastroc Beverage

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

The idea behind Shandong Rike Chemical and Eastroc Beverage 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.