Correlation Between Pengxin International and Shanghai Pudong

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

By analyzing existing cross correlation between Pengxin International Mining and Shanghai Pudong Development, you can compare the effects of market volatilities on Pengxin International and Shanghai Pudong 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 Pengxin International with a short position of Shanghai Pudong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pengxin International and Shanghai Pudong.

Diversification Opportunities for Pengxin International and Shanghai Pudong

0.17

Correlation Coefficient

Pengxin International  Shanghai Pudong

Average diversification

The 3 months correlation between Pengxin and Shanghai is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pengxin International Mining and Shanghai Pudong Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pudong Deve and Pengxin International 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 Pengxin International Mining are associated (or correlated) with Shanghai Pudong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pudong Deve has no effect on the direction of Pengxin International i.e., Pengxin International and Shanghai Pudong go up and down completely randomly.

Pair Corralation between Pengxin International and Shanghai Pudong

Assuming the 90 days trading horizon Pengxin International Mining is expected to under-perform the Shanghai Pudong. In addition to that, Pengxin International is 2.58 times more volatile than Shanghai Pudong Development. It trades about -0.08 of its total potential returns per unit of risk. Shanghai Pudong Development is currently generating about -0.13 per unit of volatility. If you would invest  1,041  in Shanghai Pudong Development on December 1, 2024 and sell it today you would lose (24.00) from holding Shanghai Pudong Development or give up 2.31% of portfolio value over 90 days.

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

Pengxin International Mining  vs.  Shanghai Pudong Development

Pengxin International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pengxin International Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pengxin International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Pudong Deve

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Pudong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pengxin International and Shanghai Pudong

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

The idea behind Pengxin International Mining and Shanghai Pudong Development 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.