Correlation Between Shanghai Commercial and FDC International

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

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

Diversification Opportunities for Shanghai Commercial and FDC International

0.14

Correlation Coefficient

Shanghai Commercial  FDC International

Average diversification

The 3 months correlation between Shanghai and FDC is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Shanghai Commercial 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 Commercial Savings are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and FDC International go up and down completely randomly.

Pair Corralation between Shanghai Commercial and FDC International

Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 0.92 times more return on investment than FDC International. However, Shanghai Commercial Savings is 1.08 times less risky than FDC International. It trades about 0.24 of its potential returns per unit of risk. FDC International Hotels is currently generating about 0.07 per unit of risk. If you would invest  3,720  in Shanghai Commercial Savings on September 25, 2024 and sell it today you would earn a total of  315.00  from holding Shanghai Commercial Savings or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Shanghai Commercial Savings  vs.  FDC International Hotels

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.

FDC International Hotels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FDC International Hotels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FDC International 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 Shanghai Commercial and FDC International

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

The idea behind Shanghai Commercial Savings and FDC International Hotels 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.