Correlation Between Chengtun Mining and Shanghai Pudong

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

By analyzing existing cross correlation between Chengtun Mining Group and Shanghai Pudong Development, you can compare the effects of market volatilities on Chengtun Mining and Shanghai Pudong 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 Chengtun Mining with a short position of Shanghai Pudong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengtun Mining and Shanghai Pudong.

Diversification Opportunities for Chengtun Mining and Shanghai Pudong

0.55

Correlation Coefficient

Chengtun Mining  Shanghai Pudong

Very weak diversification

The 3 months correlation between Chengtun and Shanghai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Shanghai Pudong Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pudong Deve and Chengtun Mining 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 Chengtun Mining Group are associated (or correlated) with Shanghai Pudong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pudong Deve has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and Shanghai Pudong go up and down completely randomly.

Pair Corralation between Chengtun Mining and Shanghai Pudong

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 1.82 times more return on investment than Shanghai Pudong. However, Chengtun Mining is 1.82 times more volatile than Shanghai Pudong Development. It trades about 0.19 of its potential returns per unit of risk. Shanghai Pudong Development is currently generating about 0.02 per unit of risk. If you would invest  481.00  in Chengtun Mining Group on December 27, 2024 and sell it today you would earn a total of  121.00  from holding Chengtun Mining Group or generate 25.16% return on investment over 90 days.

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

Chengtun Mining Group  vs.  Shanghai Pudong Development

Chengtun Mining Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Pudong Deve

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Pudong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chengtun Mining and Shanghai Pudong

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

The idea behind Chengtun Mining Group and Shanghai Pudong Development 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .