Correlation Between Shandong Homey and China Asset

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

Diversification Opportunities for Shandong Homey and China Asset

0.16

Correlation Coefficient

Shandong Homey  China Asset

Average diversification

The 3 months correlation between Shandong and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Homey Aquatic and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management 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 China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Shandong Homey i.e., Shandong Homey and China Asset go up and down completely randomly.

Pair Corralation between Shandong Homey and China Asset

Assuming the 90 days trading horizon Shandong Homey Aquatic is expected to under-perform the China Asset. In addition to that, Shandong Homey is 4.01 times more volatile than China Asset Management. It trades about -0.04 of its total potential returns per unit of risk. China Asset Management is currently generating about 0.38 per unit of volatility. If you would invest  309.00  in China Asset Management on October 6, 2024 and sell it today you would earn a total of  62.00  from holding China Asset Management or generate 20.06% return on investment over 90 days.

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

Shandong Homey Aquatic  vs.  China Asset Management

Shandong Homey Aquatic

Risk-Adjusted Performance

3 of 100

Insignificant

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

China Asset Management

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Homey and China Asset

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

The idea behind Shandong Homey Aquatic and China Asset Management 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.