Correlation Between Shanghai Phichem and Xiamen CD

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

By analyzing existing cross correlation between Shanghai Phichem Material and Xiamen CD, you can compare the effects of market volatilities on Shanghai Phichem and Xiamen CD 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 Shanghai Phichem with a short position of Xiamen CD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Phichem and Xiamen CD.

Diversification Opportunities for Shanghai Phichem and Xiamen CD

0.25

Correlation Coefficient

Shanghai Phichem  Xiamen CD

Modest diversification

The 3 months correlation between Shanghai and Xiamen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Phichem Material and Xiamen CD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen CD and Shanghai Phichem 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 Shanghai Phichem Material are associated (or correlated) with Xiamen CD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen CD has no effect on the direction of Shanghai Phichem i.e., Shanghai Phichem and Xiamen CD go up and down completely randomly.

Pair Corralation between Shanghai Phichem and Xiamen CD

Assuming the 90 days trading horizon Shanghai Phichem Material is expected to generate 1.13 times more return on investment than Xiamen CD. However, Shanghai Phichem is 1.13 times more volatile than Xiamen CD. It trades about -0.12 of its potential returns per unit of risk. Xiamen CD is currently generating about -0.18 per unit of risk. If you would invest  1,681  in Shanghai Phichem Material on October 25, 2024 and sell it today you would lose (102.00) from holding Shanghai Phichem Material or give up 6.07% of portfolio value over 90 days.

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

Shanghai Phichem Material  vs.  Xiamen CD

Shanghai Phichem Material

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Phichem Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Phichem may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xiamen CD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shanghai Phichem and Xiamen CD

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

The idea behind Shanghai Phichem Material and Xiamen CD 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.