Correlation Between Shanghai Broadband and Simei Media

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

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

Diversification Opportunities for Shanghai Broadband and Simei Media

0.58

Correlation Coefficient

Shanghai Broadband  Simei Media

Very weak diversification

The 3 months correlation between Shanghai and Simei is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Broadband Technology and Simei Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simei Media and Shanghai Broadband 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 Broadband Technology are associated (or correlated) with Simei Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simei Media has no effect on the direction of Shanghai Broadband i.e., Shanghai Broadband and Simei Media go up and down completely randomly.

Pair Corralation between Shanghai Broadband and Simei Media

Assuming the 90 days trading horizon Shanghai Broadband is expected to generate 2.83 times less return on investment than Simei Media. But when comparing it to its historical volatility, Shanghai Broadband Technology is 1.93 times less risky than Simei Media. It trades about 0.05 of its potential returns per unit of risk. Simei Media Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  454.00  in Simei Media Co on October 24, 2024 and sell it today you would earn a total of  85.00  from holding Simei Media Co or generate 18.72% return on investment over 90 days.

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

Shanghai Broadband Technology  vs.  Simei Media Co

Shanghai Broadband

Risk-Adjusted Performance

4 of 100

Insignificant

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

Simei Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simei Media Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Simei Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Broadband and Simei Media

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

The idea behind Shanghai Broadband Technology and Simei Media 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.