Correlation Between Shanghai Yuyuan and Shandong Hongchuang

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

Diversification Opportunities for Shanghai Yuyuan and Shandong Hongchuang

0.0

Correlation Coefficient

Shanghai Yuyuan  Shandong Hongchuang

Pay attention - limited upside

The 3 months correlation between Shanghai and Shandong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yuyuan Tourist and Shandong Hongchuang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hongchuang 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 Shandong Hongchuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hongchuang has no effect on the direction of Shanghai Yuyuan i.e., Shanghai Yuyuan and Shandong Hongchuang go up and down completely randomly.

Pair Corralation between Shanghai Yuyuan and Shandong Hongchuang

If you would invest  897.00  in Shandong Hongchuang Aluminum on December 26, 2024 and sell it today you would earn a total of  238.00  from holding Shandong Hongchuang Aluminum or generate 26.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.75%
Values	Daily Returns

Shanghai Yuyuan Tourist  vs.  Shandong Hongchuang Aluminum

Shanghai Yuyuan Tourist

Risk-Adjusted Performance

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.

Shandong Hongchuang

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Hongchuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Yuyuan and Shandong Hongchuang

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

The idea behind Shanghai Yuyuan Tourist and Shandong Hongchuang Aluminum 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.