Correlation Between Shandong Iron and Postal Savings

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

Diversification Opportunities for Shandong Iron and Postal Savings

0.04

Correlation Coefficient

Shandong Iron  Postal Savings

Significant diversification

The 3 months correlation between Shandong and Postal is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Iron and and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Shandong Iron i.e., Shandong Iron and Postal Savings go up and down completely randomly.

Pair Corralation between Shandong Iron and Postal Savings

Assuming the 90 days trading horizon Shandong Iron is expected to generate 3.93 times less return on investment than Postal Savings. In addition to that, Shandong Iron is 1.08 times more volatile than Postal Savings Bank. It trades about 0.01 of its total potential returns per unit of risk. Postal Savings Bank is currently generating about 0.04 per unit of volatility. If you would invest  464.00  in Postal Savings Bank on October 4, 2024 and sell it today you would earn a total of  104.00  from holding Postal Savings Bank or generate 22.41% return on investment over 90 days.

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

Shandong Iron and  vs.  Postal Savings Bank

Shandong Iron

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Shandong Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Postal Savings Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Postal Savings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shandong Iron and Postal Savings

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

The idea behind Shandong Iron and and Postal Savings Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..