Correlation Between State Grid and Shanghai Yanpu

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

By analyzing existing cross correlation between State Grid InformationCommunication and Shanghai Yanpu Metal, you can compare the effects of market volatilities on State Grid and Shanghai Yanpu 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 State Grid with a short position of Shanghai Yanpu. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Shanghai Yanpu.

Diversification Opportunities for State Grid and Shanghai Yanpu

0.5

Correlation Coefficient

State Grid  Shanghai Yanpu

Very weak diversification

The 3 months correlation between State and Shanghai is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Shanghai Yanpu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yanpu Metal and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Shanghai Yanpu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yanpu Metal has no effect on the direction of State Grid i.e., State Grid and Shanghai Yanpu go up and down completely randomly.

Pair Corralation between State Grid and Shanghai Yanpu

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Shanghai Yanpu. In addition to that, State Grid is 1.12 times more volatile than Shanghai Yanpu Metal. It trades about -0.18 of its total potential returns per unit of risk. Shanghai Yanpu Metal is currently generating about -0.05 per unit of volatility. If you would invest  3,899  in Shanghai Yanpu Metal on October 6, 2024 and sell it today you would lose (250.00) from holding Shanghai Yanpu Metal or give up 6.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

State Grid InformationCommunic  vs.  Shanghai Yanpu Metal

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Grid InformationCommunication 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.

Shanghai Yanpu Metal

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with State Grid and Shanghai Yanpu

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

The idea behind State Grid InformationCommunication and Shanghai Yanpu Metal 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.