Correlation Between Shanghai Broadband and Sichuan Qiaoyuan

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

Diversification Opportunities for Shanghai Broadband and Sichuan Qiaoyuan

0.58

Correlation Coefficient

Shanghai Broadband  Sichuan Qiaoyuan

Very weak diversification

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

Pair Corralation between Shanghai Broadband and Sichuan Qiaoyuan

Assuming the 90 days trading horizon Shanghai Broadband Technology is expected to under-perform the Sichuan Qiaoyuan. In addition to that, Shanghai Broadband is 1.14 times more volatile than Sichuan Qiaoyuan Gas. It trades about -0.3 of its total potential returns per unit of risk. Sichuan Qiaoyuan Gas is currently generating about -0.03 per unit of volatility. If you would invest  3,590  in Sichuan Qiaoyuan Gas on October 9, 2024 and sell it today you would lose (105.00) from holding Sichuan Qiaoyuan Gas or give up 2.92% of portfolio value over 90 days.

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

Shanghai Broadband Technology  vs.  Sichuan Qiaoyuan Gas

Shanghai Broadband

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Broadband Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Qiaoyuan Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Qiaoyuan Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sichuan Qiaoyuan 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 Broadband and Sichuan Qiaoyuan

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

The idea behind Shanghai Broadband Technology and Sichuan Qiaoyuan Gas 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.