Correlation Between Shanghai Phichem and Northern United

Can any of the company-specific risk be diversified away by investing in both Shanghai Phichem and Northern United 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 Northern United 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 Northern United Publishing, you can compare the effects of market volatilities on Shanghai Phichem and Northern United 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 Northern United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Phichem and Northern United.

Diversification Opportunities for Shanghai Phichem and Northern United

0.74

Correlation Coefficient

Shanghai Phichem  Northern United

Poor diversification

The 3 months correlation between Shanghai and Northern is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Phichem Material and Northern United Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern United Publ 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 Northern United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern United Publ has no effect on the direction of Shanghai Phichem i.e., Shanghai Phichem and Northern United go up and down completely randomly.

Pair Corralation between Shanghai Phichem and Northern United

Assuming the 90 days trading horizon Shanghai Phichem Material is expected to generate 0.91 times more return on investment than Northern United. However, Shanghai Phichem Material is 1.1 times less risky than Northern United. It trades about 0.03 of its potential returns per unit of risk. Northern United Publishing is currently generating about -0.04 per unit of risk. If you would invest  1,658  in Shanghai Phichem Material on December 27, 2024 and sell it today you would earn a total of  47.00  from holding Shanghai Phichem Material or generate 2.83% return on investment over 90 days.

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

Shanghai Phichem Material  vs.  Northern United Publishing

Shanghai Phichem Material

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Phichem Material are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Phichem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Northern United Publ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern United Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Northern United 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 Northern United

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

The idea behind Shanghai Phichem Material and Northern United Publishing 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.