Correlation Between Shandong Homey and Shandong Himile

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

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

Diversification Opportunities for Shandong Homey and Shandong Himile

-0.58

Correlation Coefficient

Shandong Homey  Shandong Himile

Excellent diversification

The 3 months correlation between Shandong and Shandong is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Homey Aquatic 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 Shandong Homey 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 Homey Aquatic 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 Shandong Homey i.e., Shandong Homey and Shandong Himile go up and down completely randomly.

Pair Corralation between Shandong Homey and Shandong Himile

Assuming the 90 days trading horizon Shandong Homey is expected to generate 27.22 times less return on investment than Shandong Himile. In addition to that, Shandong Homey is 1.45 times more volatile than Shandong Himile Mechanical. It trades about 0.0 of its total potential returns per unit of risk. Shandong Himile Mechanical is currently generating about 0.1 per unit of volatility. If you would invest  2,457  in Shandong Himile Mechanical on October 11, 2024 and sell it today you would earn a total of  2,728  from holding Shandong Himile Mechanical or generate 111.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Shandong Homey Aquatic  vs.  Shandong Himile Mechanical

Shandong Homey Aquatic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Himile Mech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Himile Mechanical are ranked lower than 9 (%) 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 Shandong Homey and Shandong Himile

The main advantage of trading using opposite Shandong Homey and Shandong Himile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Homey 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 Shandong Homey Aquatic 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.