Correlation Between Cheng Fwa and Shanghai Commercial

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

By analyzing existing cross correlation between Cheng Fwa Industrial and Shanghai Commercial Savings, you can compare the effects of market volatilities on Cheng Fwa and Shanghai Commercial 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 Cheng Fwa with a short position of Shanghai Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Fwa and Shanghai Commercial.

Diversification Opportunities for Cheng Fwa and Shanghai Commercial

-0.35

Correlation Coefficient

Cheng Fwa  Shanghai Commercial

Very good diversification

The 3 months correlation between Cheng and Shanghai is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Fwa Industrial and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial and Cheng Fwa 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 Cheng Fwa Industrial are associated (or correlated) with Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of Cheng Fwa i.e., Cheng Fwa and Shanghai Commercial go up and down completely randomly.

Pair Corralation between Cheng Fwa and Shanghai Commercial

Assuming the 90 days trading horizon Cheng Fwa Industrial is expected to under-perform the Shanghai Commercial. In addition to that, Cheng Fwa is 1.41 times more volatile than Shanghai Commercial Savings. It trades about -0.24 of its total potential returns per unit of risk. Shanghai Commercial Savings is currently generating about 0.04 per unit of volatility. If you would invest  4,035  in Shanghai Commercial Savings on October 11, 2024 and sell it today you would earn a total of  35.00  from holding Shanghai Commercial Savings or generate 0.87% return on investment over 90 days.

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

Cheng Fwa Industrial  vs.  Shanghai Commercial Savings

Cheng Fwa Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Fwa Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Fwa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai Commercial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shanghai Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cheng Fwa and Shanghai Commercial

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

The idea behind Cheng Fwa Industrial and Shanghai Commercial Savings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.