Correlation Between Shandong Gold and Tianjin You

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

Diversification Opportunities for Shandong Gold and Tianjin You

-0.19

Correlation Coefficient

Shandong Gold  Tianjin You

Good diversification

The 3 months correlation between Shandong and Tianjin is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Tianjin You Fa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin You Fa 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 Tianjin You. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin You Fa has no effect on the direction of Shandong Gold i.e., Shandong Gold and Tianjin You go up and down completely randomly.

Pair Corralation between Shandong Gold and Tianjin You

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Tianjin You. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.2 times less risky than Tianjin You. The stock trades about -0.15 of its potential returns per unit of risk. The Tianjin You Fa is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  620.00  in Tianjin You Fa on October 8, 2024 and sell it today you would lose (93.00) from holding Tianjin You Fa or give up 15.0% of portfolio value over 90 days.

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

Shandong Gold Mining  vs.  Tianjin You Fa

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.

Tianjin You Fa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin You Fa 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 Tianjin You

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

The idea behind Shandong Gold Mining and Tianjin You Fa 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.