Correlation Between Shanghai Pudong and Simei Media

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

By analyzing existing cross correlation between Shanghai Pudong Development and Simei Media Co, you can compare the effects of market volatilities on Shanghai Pudong and Simei Media 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 Pudong with a short position of Simei Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Pudong and Simei Media.

Diversification Opportunities for Shanghai Pudong and Simei Media

-0.64

Correlation Coefficient

Shanghai Pudong  Simei Media

Excellent diversification

The 3 months correlation between Shanghai and Simei is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Pudong Development and Simei Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simei Media and Shanghai Pudong 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 Pudong Development are associated (or correlated) with Simei Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simei Media has no effect on the direction of Shanghai Pudong i.e., Shanghai Pudong and Simei Media go up and down completely randomly.

Pair Corralation between Shanghai Pudong and Simei Media

Assuming the 90 days trading horizon Shanghai Pudong is expected to generate 1.05 times less return on investment than Simei Media. But when comparing it to its historical volatility, Shanghai Pudong Development is 3.66 times less risky than Simei Media. It trades about 0.07 of its potential returns per unit of risk. Simei Media Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  542.00  in Simei Media Co on October 24, 2024 and sell it today you would lose (3.00) from holding Simei Media Co or give up 0.55% of portfolio value over 90 days.

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

Shanghai Pudong Development  vs.  Simei Media Co

Shanghai Pudong Deve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Pudong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Simei Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simei Media Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Simei Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Pudong and Simei Media

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

The idea behind Shanghai Pudong Development and Simei Media Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.