Correlation Between Shanghai Shibei and China Vanke

Can any of the company-specific risk be diversified away by investing in both Shanghai Shibei and China Vanke 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 Shanghai Shibei and China Vanke into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Shibei Hi Tech and China Vanke Co, you can compare the effects of market volatilities on Shanghai Shibei and China Vanke 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 Shanghai Shibei with a short position of China Vanke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Shibei and China Vanke.

Diversification Opportunities for Shanghai Shibei and China Vanke

0.86

Correlation Coefficient

Shanghai Shibei  China Vanke

Very poor diversification

The 3 months correlation between Shanghai and China is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Shibei Hi Tech and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Shanghai Shibei 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 Shanghai Shibei Hi Tech are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Shanghai Shibei i.e., Shanghai Shibei and China Vanke go up and down completely randomly.

Pair Corralation between Shanghai Shibei and China Vanke

Assuming the 90 days trading horizon Shanghai Shibei Hi Tech is expected to generate 0.78 times more return on investment than China Vanke. However, Shanghai Shibei Hi Tech is 1.27 times less risky than China Vanke. It trades about -0.02 of its potential returns per unit of risk. China Vanke Co is currently generating about -0.02 per unit of risk. If you would invest  490.00  in Shanghai Shibei Hi Tech on December 26, 2024 and sell it today you would lose (17.00) from holding Shanghai Shibei Hi Tech or give up 3.47% of portfolio value over 90 days.

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

Shanghai Shibei Hi Tech  vs.  China Vanke Co

Shanghai Shibei Hi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Shibei Hi Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Shibei is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Vanke

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Vanke Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Vanke is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Shibei and China Vanke

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

The idea behind Shanghai Shibei Hi Tech and China Vanke Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.