Correlation Between Shanghai Shibei and Yunnan Chuangxin

Can any of the company-specific risk be diversified away by investing in both Shanghai Shibei and Yunnan Chuangxin 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 Yunnan Chuangxin 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 Yunnan Chuangxin New, you can compare the effects of market volatilities on Shanghai Shibei and Yunnan Chuangxin 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 Yunnan Chuangxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Shibei and Yunnan Chuangxin.

Diversification Opportunities for Shanghai Shibei and Yunnan Chuangxin

0.33

Correlation Coefficient

Shanghai Shibei  Yunnan Chuangxin

Weak diversification

The 3 months correlation between Shanghai and Yunnan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Shibei Hi Tech and Yunnan Chuangxin New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chuangxin New 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 Yunnan Chuangxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chuangxin New has no effect on the direction of Shanghai Shibei i.e., Shanghai Shibei and Yunnan Chuangxin go up and down completely randomly.

Pair Corralation between Shanghai Shibei and Yunnan Chuangxin

Assuming the 90 days trading horizon Shanghai Shibei Hi Tech is expected to generate 3.31 times more return on investment than Yunnan Chuangxin. However, Shanghai Shibei is 3.31 times more volatile than Yunnan Chuangxin New. It trades about -0.1 of its potential returns per unit of risk. Yunnan Chuangxin New is currently generating about -0.66 per unit of risk. If you would invest  499.00  in Shanghai Shibei Hi Tech on October 9, 2024 and sell it today you would lose (62.00) from holding Shanghai Shibei Hi Tech or give up 12.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Shanghai Shibei Hi Tech  vs.  Yunnan Chuangxin New

Shanghai Shibei Hi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Shibei Hi Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Shibei may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yunnan Chuangxin New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yunnan Chuangxin New 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 Shanghai Shibei and Yunnan Chuangxin

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

The idea behind Shanghai Shibei Hi Tech and Yunnan Chuangxin New 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.