Correlation Between Huaxia Fund and Shanghai CEO

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

By analyzing existing cross correlation between Huaxia Fund Management and Shanghai CEO Environmental, you can compare the effects of market volatilities on Huaxia Fund and Shanghai CEO 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 Huaxia Fund with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaxia Fund and Shanghai CEO.

Diversification Opportunities for Huaxia Fund and Shanghai CEO

-0.71

Correlation Coefficient

Huaxia Fund  Shanghai CEO

Pay attention - limited upside

The 3 months correlation between Huaxia and Shanghai is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and Huaxia Fund 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 Huaxia Fund Management are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and Shanghai CEO go up and down completely randomly.

Pair Corralation between Huaxia Fund and Shanghai CEO

Assuming the 90 days trading horizon Huaxia Fund Management is expected to under-perform the Shanghai CEO. But the stock apears to be less risky and, when comparing its historical volatility, Huaxia Fund Management is 3.53 times less risky than Shanghai CEO. The stock trades about -0.04 of its potential returns per unit of risk. The Shanghai CEO Environmental is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  772.00  in Shanghai CEO Environmental on September 5, 2024 and sell it today you would earn a total of  218.00  from holding Shanghai CEO Environmental or generate 28.24% return on investment over 90 days.

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

Huaxia Fund Management  vs.  Shanghai CEO Environmental

Huaxia Fund Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shanghai CEO Environ

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huaxia Fund and Shanghai CEO

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

The idea behind Huaxia Fund Management and Shanghai CEO Environmental 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.