Correlation Between Shandong Gold and Xinyaqiang Silicon

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

Diversification Opportunities for Shandong Gold and Xinyaqiang Silicon

-0.75

Correlation Coefficient

Shandong Gold  Xinyaqiang Silicon

Pay attention - limited upside

The 3 months correlation between Shandong and Xinyaqiang is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Xinyaqiang Silicon Chemistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyaqiang Silicon 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 Xinyaqiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyaqiang Silicon has no effect on the direction of Shandong Gold i.e., Shandong Gold and Xinyaqiang Silicon go up and down completely randomly.

Pair Corralation between Shandong Gold and Xinyaqiang Silicon

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Xinyaqiang Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.92 times less risky than Xinyaqiang Silicon. The stock trades about -0.15 of its potential returns per unit of risk. The Xinyaqiang Silicon Chemistry is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,387  in Xinyaqiang Silicon Chemistry on October 6, 2024 and sell it today you would lose (67.00) from holding Xinyaqiang Silicon Chemistry or give up 4.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Shandong Gold Mining  vs.  Xinyaqiang Silicon Chemistry

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.

Xinyaqiang Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinyaqiang Silicon Chemistry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xinyaqiang Silicon 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 Xinyaqiang Silicon

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

The idea behind Shandong Gold Mining and Xinyaqiang Silicon Chemistry 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.