Correlation Between Shanghai Commercial and Chumpower Machinery

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

Diversification Opportunities for Shanghai Commercial and Chumpower Machinery

0.92

Correlation Coefficient

Shanghai Commercial  Chumpower Machinery

Almost no diversification

The 3 months correlation between Shanghai and Chumpower is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp 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 Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Chumpower Machinery go up and down completely randomly.

Pair Corralation between Shanghai Commercial and Chumpower Machinery

Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 0.71 times more return on investment than Chumpower Machinery. However, Shanghai Commercial Savings is 1.41 times less risky than Chumpower Machinery. It trades about 0.17 of its potential returns per unit of risk. Chumpower Machinery Corp is currently generating about 0.12 per unit of risk. If you would invest  4,095  in Shanghai Commercial Savings on December 25, 2024 and sell it today you would earn a total of  420.00  from holding Shanghai Commercial Savings or generate 10.26% return on investment over 90 days.

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

Shanghai Commercial Savings  vs.  Chumpower Machinery Corp

Shanghai Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shanghai Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chumpower Machinery Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chumpower Machinery Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chumpower Machinery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shanghai Commercial and Chumpower Machinery

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

The idea behind Shanghai Commercial Savings and Chumpower Machinery Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.