Correlation Between Shandong Gold and Jiangsu Shuangxing

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

Diversification Opportunities for Shandong Gold and Jiangsu Shuangxing

-0.37

Correlation Coefficient

Shandong Gold  Jiangsu Shuangxing

Very good diversification

The 3 months correlation between Shandong and Jiangsu is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Jiangsu Shuangxing Color in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Shuangxing Color 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 Jiangsu Shuangxing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Shuangxing Color has no effect on the direction of Shandong Gold i.e., Shandong Gold and Jiangsu Shuangxing go up and down completely randomly.

Pair Corralation between Shandong Gold and Jiangsu Shuangxing

Assuming the 90 days trading horizon Shandong Gold Mining is expected to generate 0.53 times more return on investment than Jiangsu Shuangxing. However, Shandong Gold Mining is 1.88 times less risky than Jiangsu Shuangxing. It trades about -0.15 of its potential returns per unit of risk. Jiangsu Shuangxing Color is currently generating about -0.11 per unit of risk. If you would invest  2,663  in Shandong Gold Mining on October 6, 2024 and sell it today you would lose (251.00) from holding Shandong Gold Mining or give up 9.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Shandong Gold Mining  vs.  Jiangsu Shuangxing Color

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangsu Shuangxing Color

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Shuangxing Color has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shandong Gold and Jiangsu Shuangxing

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

The idea behind Shandong Gold Mining and Jiangsu Shuangxing Color 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.