Correlation Between Shanghai Commercial and Buima

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

Diversification Opportunities for Shanghai Commercial and Buima

-0.4

Correlation Coefficient

Shanghai Commercial  Buima

Very good diversification

The 3 months correlation between Shanghai and Buima is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Buima Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buima Group 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 Buima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buima Group has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Buima go up and down completely randomly.

Pair Corralation between Shanghai Commercial and Buima

Assuming the 90 days trading horizon Shanghai Commercial is expected to generate 4.16 times less return on investment than Buima. But when comparing it to its historical volatility, Shanghai Commercial Savings is 3.46 times less risky than Buima. It trades about 0.15 of its potential returns per unit of risk. Buima Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,081  in Buima Group on October 26, 2024 and sell it today you would earn a total of  279.00  from holding Buima Group or generate 13.41% return on investment over 90 days.

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

Shanghai Commercial Savings  vs.  Buima Group

Shanghai Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 7 (%) 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 February 2025.

Buima Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Buima Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Buima showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Commercial and Buima

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

The idea behind Shanghai Commercial Savings and Buima Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.