Correlation Between Shandong Gold and Shanxi Tond

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

By analyzing existing cross correlation between Shandong Gold Mining and Shanxi Tond Chemical, you can compare the effects of market volatilities on Shandong Gold and Shanxi Tond 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 Gold with a short position of Shanxi Tond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and Shanxi Tond.

Diversification Opportunities for Shandong Gold and Shanxi Tond

-0.34

Correlation Coefficient

Shandong Gold  Shanxi Tond

Very good diversification

The 3 months correlation between Shandong and Shanxi is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Shanxi Tond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanxi Tond Chemical and Shandong Gold 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 Gold Mining are associated (or correlated) with Shanxi Tond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanxi Tond Chemical has no effect on the direction of Shandong Gold i.e., Shandong Gold and Shanxi Tond go up and down completely randomly.

Pair Corralation between Shandong Gold and Shanxi Tond

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Shanxi Tond. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.57 times less risky than Shanxi Tond. The stock trades about -0.11 of its potential returns per unit of risk. The Shanxi Tond Chemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  492.00  in Shanxi Tond Chemical on October 15, 2024 and sell it today you would earn a total of  7.00  from holding Shanxi Tond Chemical or generate 1.42% return on investment over 90 days.

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

Shandong Gold Mining  vs.  Shanxi Tond Chemical

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanxi Tond Chemical

Risk-Adjusted Performance

1 of 100

Very Weak

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

Pair Trading with Shandong Gold and Shanxi Tond

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

The idea behind Shandong Gold Mining and Shanxi Tond Chemical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.