Correlation Between Chinese Universe and Shandong Himile

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

By analyzing existing cross correlation between Chinese Universe Publishing and Shandong Himile Mechanical, you can compare the effects of market volatilities on Chinese Universe and Shandong Himile 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 Chinese Universe with a short position of Shandong Himile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and Shandong Himile.

Diversification Opportunities for Chinese Universe and Shandong Himile

-0.8

Correlation Coefficient

Chinese Universe  Shandong Himile

Pay attention - limited upside

The 3 months correlation between Chinese and Shandong is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Universe Publishing and Shandong Himile Mechanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Himile Mech and Chinese Universe 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 Chinese Universe Publishing are associated (or correlated) with Shandong Himile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Himile Mech has no effect on the direction of Chinese Universe i.e., Chinese Universe and Shandong Himile go up and down completely randomly.

Pair Corralation between Chinese Universe and Shandong Himile

Assuming the 90 days trading horizon Chinese Universe Publishing is expected to under-perform the Shandong Himile. But the stock apears to be less risky and, when comparing its historical volatility, Chinese Universe Publishing is 1.44 times less risky than Shandong Himile. The stock trades about -0.18 of its potential returns per unit of risk. The Shandong Himile Mechanical is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,790  in Shandong Himile Mechanical on December 26, 2024 and sell it today you would earn a total of  1,026  from holding Shandong Himile Mechanical or generate 21.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Chinese Universe Publishing  vs.  Shandong Himile Mechanical

Chinese Universe Pub

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Himile Mech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Himile Mechanical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Himile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chinese Universe and Shandong Himile

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

The idea behind Chinese Universe Publishing and Shandong Himile Mechanical 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.