Correlation Between Shanghai Yuyuan and China Minmetals

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

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

Diversification Opportunities for Shanghai Yuyuan and China Minmetals

0.05

Correlation Coefficient

Shanghai Yuyuan  China Minmetals

Significant diversification

The 3 months correlation between Shanghai and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yuyuan Tourist and China Minmetals Rare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minmetals Rare and Shanghai Yuyuan 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 Yuyuan Tourist are associated (or correlated) with China Minmetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minmetals Rare has no effect on the direction of Shanghai Yuyuan i.e., Shanghai Yuyuan and China Minmetals go up and down completely randomly.

Pair Corralation between Shanghai Yuyuan and China Minmetals

Assuming the 90 days trading horizon Shanghai Yuyuan Tourist is expected to under-perform the China Minmetals. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Yuyuan Tourist is 1.57 times less risky than China Minmetals. The stock trades about -0.32 of its potential returns per unit of risk. The China Minmetals Rare is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,909  in China Minmetals Rare on October 25, 2024 and sell it today you would lose (103.00) from holding China Minmetals Rare or give up 3.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Shanghai Yuyuan Tourist  vs.  China Minmetals Rare

Shanghai Yuyuan Tourist

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Minmetals Rare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Minmetals Rare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Minmetals 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 Yuyuan and China Minmetals

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

The idea behind Shanghai Yuyuan Tourist and China Minmetals Rare 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.