Correlation Between Xiamen CD and Shanghai Phichem

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

By analyzing existing cross correlation between Xiamen CD and Shanghai Phichem Material, you can compare the effects of market volatilities on Xiamen CD and Shanghai Phichem 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 Xiamen CD with a short position of Shanghai Phichem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiamen CD and Shanghai Phichem.

Diversification Opportunities for Xiamen CD and Shanghai Phichem

0.24

Correlation Coefficient

Xiamen CD  Shanghai Phichem

Modest diversification

The 3 months correlation between Xiamen and Shanghai is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen CD and Shanghai Phichem Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Phichem Material and Xiamen CD 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 Xiamen CD are associated (or correlated) with Shanghai Phichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Phichem Material has no effect on the direction of Xiamen CD i.e., Xiamen CD and Shanghai Phichem go up and down completely randomly.

Pair Corralation between Xiamen CD and Shanghai Phichem

Assuming the 90 days trading horizon Xiamen CD is expected to generate 11.77 times less return on investment than Shanghai Phichem. But when comparing it to its historical volatility, Xiamen CD is 1.92 times less risky than Shanghai Phichem. It trades about 0.01 of its potential returns per unit of risk. Shanghai Phichem Material is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,496  in Shanghai Phichem Material on October 26, 2024 and sell it today you would earn a total of  83.00  from holding Shanghai Phichem Material or generate 5.55% return on investment over 90 days.

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

Xiamen CD  vs.  Shanghai Phichem Material

Xiamen CD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiamen CD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiamen CD is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Phichem Material

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Phichem Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Phichem may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xiamen CD and Shanghai Phichem

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

The idea behind Xiamen CD and Shanghai Phichem Material 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.