Correlation Between Panda Financial and Shandong Longquan

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

By analyzing existing cross correlation between Panda Financial Holding and Shandong Longquan Pipeline, you can compare the effects of market volatilities on Panda Financial and Shandong Longquan 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 Panda Financial with a short position of Shandong Longquan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panda Financial and Shandong Longquan.

Diversification Opportunities for Panda Financial and Shandong Longquan

0.76

Correlation Coefficient

Panda Financial  Shandong Longquan

Poor diversification

The 3 months correlation between Panda and Shandong is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and Shandong Longquan Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longquan and Panda Financial 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 Panda Financial Holding are associated (or correlated) with Shandong Longquan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longquan has no effect on the direction of Panda Financial i.e., Panda Financial and Shandong Longquan go up and down completely randomly.

Pair Corralation between Panda Financial and Shandong Longquan

Assuming the 90 days trading horizon Panda Financial Holding is expected to under-perform the Shandong Longquan. In addition to that, Panda Financial is 1.04 times more volatile than Shandong Longquan Pipeline. It trades about 0.0 of its total potential returns per unit of risk. Shandong Longquan Pipeline is currently generating about 0.01 per unit of volatility. If you would invest  449.00  in Shandong Longquan Pipeline on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Shandong Longquan Pipeline or generate 0.45% return on investment over 90 days.

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

Panda Financial Holding  vs.  Shandong Longquan Pipeline

Panda Financial Holding

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Panda Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shandong Longquan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longquan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Panda Financial and Shandong Longquan

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

The idea behind Panda Financial Holding and Shandong Longquan Pipeline 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.