Correlation Between Metro Investment and Shuhua Sports

Can any of the company-specific risk be diversified away by investing in both Metro Investment and Shuhua Sports 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 Metro Investment and Shuhua Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metro Investment Development and Shuhua Sports Co, you can compare the effects of market volatilities on Metro Investment and Shuhua Sports 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 Metro Investment with a short position of Shuhua Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Investment and Shuhua Sports.

Diversification Opportunities for Metro Investment and Shuhua Sports

0.52

Correlation Coefficient

Metro Investment  Shuhua Sports

Very weak diversification

The 3 months correlation between Metro and Shuhua is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports and Metro Investment 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 Metro Investment Development are associated (or correlated) with Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Metro Investment i.e., Metro Investment and Shuhua Sports go up and down completely randomly.

Pair Corralation between Metro Investment and Shuhua Sports

Assuming the 90 days trading horizon Metro Investment Development is expected to under-perform the Shuhua Sports. But the stock apears to be less risky and, when comparing its historical volatility, Metro Investment Development is 1.03 times less risky than Shuhua Sports. The stock trades about -0.2 of its potential returns per unit of risk. The Shuhua Sports Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Shuhua Sports Co on September 28, 2024 and sell it today you would lose (36.00) from holding Shuhua Sports Co or give up 4.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Metro Investment Development  vs.  Shuhua Sports Co

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shuhua Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metro Investment and Shuhua Sports

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

The idea behind Metro Investment Development and Shuhua Sports 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.