Correlation Between Shining Building and Radium Life

Can any of the company-specific risk be diversified away by investing in both Shining Building and Radium Life 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 Shining Building and Radium Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shining Building Business and Radium Life Tech, you can compare the effects of market volatilities on Shining Building and Radium Life 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 Shining Building with a short position of Radium Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shining Building and Radium Life.

Diversification Opportunities for Shining Building and Radium Life

-0.05

Correlation Coefficient

Shining Building  Radium Life

Good diversification

The 3 months correlation between Shining and Radium is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shining Building Business and Radium Life Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radium Life Tech and Shining Building 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 Shining Building Business are associated (or correlated) with Radium Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radium Life Tech has no effect on the direction of Shining Building i.e., Shining Building and Radium Life go up and down completely randomly.

Pair Corralation between Shining Building and Radium Life

Assuming the 90 days trading horizon Shining Building is expected to generate 9.12 times less return on investment than Radium Life. But when comparing it to its historical volatility, Shining Building Business is 1.36 times less risky than Radium Life. It trades about 0.03 of its potential returns per unit of risk. Radium Life Tech is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,115  in Radium Life Tech on December 22, 2024 and sell it today you would earn a total of  255.00  from holding Radium Life Tech or generate 22.87% return on investment over 90 days.

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

Shining Building Business  vs.  Radium Life Tech

Shining Building Business

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shining Building Business are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shining Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Radium Life Tech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Radium Life Tech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Radium Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shining Building and Radium Life

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

The idea behind Shining Building Business and Radium Life Tech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.