Correlation Between Shenyang Blue and Chongqing Shunbo

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

By analyzing existing cross correlation between Shenyang Blue Silver and Chongqing Shunbo Aluminum, you can compare the effects of market volatilities on Shenyang Blue and Chongqing Shunbo 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 Shenyang Blue with a short position of Chongqing Shunbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Blue and Chongqing Shunbo.

Diversification Opportunities for Shenyang Blue and Chongqing Shunbo

0.46

Correlation Coefficient

Shenyang Blue  Chongqing Shunbo

Very weak diversification

The 3 months correlation between Shenyang and Chongqing is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Blue Silver and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum and Shenyang Blue 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 Shenyang Blue Silver are associated (or correlated) with Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Shenyang Blue i.e., Shenyang Blue and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Shenyang Blue and Chongqing Shunbo

Assuming the 90 days trading horizon Shenyang Blue Silver is expected to generate 1.8 times more return on investment than Chongqing Shunbo. However, Shenyang Blue is 1.8 times more volatile than Chongqing Shunbo Aluminum. It trades about 0.06 of its potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about 0.07 per unit of risk. If you would invest  2,165  in Shenyang Blue Silver on September 29, 2024 and sell it today you would earn a total of  262.00  from holding Shenyang Blue Silver or generate 12.1% return on investment over 90 days.

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

Shenyang Blue Silver  vs.  Chongqing Shunbo Aluminum

Shenyang Blue Silver

Risk-Adjusted Performance

4 of 100

Insignificant

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

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Shunbo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shenyang Blue and Chongqing Shunbo

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

The idea behind Shenyang Blue Silver and Chongqing Shunbo Aluminum 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.