Correlation Between Shandong Iron and CNPC Capital

Can any of the company-specific risk be diversified away by investing in both Shandong Iron and CNPC Capital 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 Shandong Iron and CNPC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Iron and and CNPC Capital Co, you can compare the effects of market volatilities on Shandong Iron and CNPC Capital 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 Shandong Iron with a short position of CNPC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Iron and CNPC Capital.

Diversification Opportunities for Shandong Iron and CNPC Capital

0.07

Correlation Coefficient

Shandong Iron  CNPC Capital

Significant diversification

The 3 months correlation between Shandong and CNPC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Iron and and CNPC Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNPC Capital and Shandong Iron 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 Shandong Iron and are associated (or correlated) with CNPC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNPC Capital has no effect on the direction of Shandong Iron i.e., Shandong Iron and CNPC Capital go up and down completely randomly.

Pair Corralation between Shandong Iron and CNPC Capital

Assuming the 90 days trading horizon Shandong Iron and is expected to generate 0.98 times more return on investment than CNPC Capital. However, Shandong Iron and is 1.02 times less risky than CNPC Capital. It trades about -0.07 of its potential returns per unit of risk. CNPC Capital Co is currently generating about -0.09 per unit of risk. If you would invest  149.00  in Shandong Iron and on December 26, 2024 and sell it today you would lose (10.00) from holding Shandong Iron and or give up 6.71% of portfolio value over 90 days.

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

Shandong Iron and  vs.  CNPC Capital Co

Shandong Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Iron and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CNPC Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNPC Capital Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shandong Iron and CNPC Capital

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

The idea behind Shandong Iron and and CNPC Capital 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.