Correlation Between Shanghai Yuyuan and Chengtun Mining

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

Diversification Opportunities for Shanghai Yuyuan and Chengtun Mining

-0.33

Correlation Coefficient

Shanghai Yuyuan  Chengtun Mining

Very good diversification

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

Pair Corralation between Shanghai Yuyuan and Chengtun Mining

Assuming the 90 days trading horizon Shanghai Yuyuan Tourist is expected to under-perform the Chengtun Mining. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Yuyuan Tourist is 1.21 times less risky than Chengtun Mining. The stock trades about -0.03 of its potential returns per unit of risk. The Chengtun Mining Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Chengtun Mining Group on October 26, 2024 and sell it today you would lose (10.00) from holding Chengtun Mining Group or give up 1.95% of portfolio value over 90 days.

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

Shanghai Yuyuan Tourist  vs.  Chengtun Mining Group

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.

Chengtun Mining Group

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Chengtun Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chengtun Mining 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 Chengtun Mining

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

The idea behind Shanghai Yuyuan Tourist and Chengtun Mining Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.