Correlation Between Shandong Homey and UE Furniture

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

Diversification Opportunities for Shandong Homey and UE Furniture

0.77

Correlation Coefficient

Shandong Homey  UE Furniture

Poor diversification

The 3 months correlation between Shandong and 603600 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Homey Aquatic and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture 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 UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Shandong Homey i.e., Shandong Homey and UE Furniture go up and down completely randomly.

Pair Corralation between Shandong Homey and UE Furniture

Assuming the 90 days trading horizon Shandong Homey Aquatic is expected to generate 1.84 times more return on investment than UE Furniture. However, Shandong Homey is 1.84 times more volatile than UE Furniture Co. It trades about 0.2 of its potential returns per unit of risk. UE Furniture Co is currently generating about 0.15 per unit of risk. If you would invest  151.00  in Shandong Homey Aquatic on August 30, 2024 and sell it today you would earn a total of  92.00  from holding Shandong Homey Aquatic or generate 60.93% return on investment over 90 days.

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

Shandong Homey Aquatic  vs.  UE Furniture Co

Shandong Homey Aquatic

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 15 (%) 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.

UE Furniture

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UE Furniture Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UE Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Homey and UE Furniture

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

The idea behind Shandong Homey Aquatic and UE Furniture Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.