Correlation Between Shanghai Material and Jiangsu Yueda

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

By analyzing existing cross correlation between Shanghai Material Trading and Jiangsu Yueda Investment, you can compare the effects of market volatilities on Shanghai Material and Jiangsu Yueda 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 Material with a short position of Jiangsu Yueda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Material and Jiangsu Yueda.

Diversification Opportunities for Shanghai Material and Jiangsu Yueda

0.68

Correlation Coefficient

Shanghai Material  Jiangsu Yueda

Poor diversification

The 3 months correlation between Shanghai and Jiangsu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Material Trading and Jiangsu Yueda Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yueda Investment and Shanghai Material 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 Material Trading are associated (or correlated) with Jiangsu Yueda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yueda Investment has no effect on the direction of Shanghai Material i.e., Shanghai Material and Jiangsu Yueda go up and down completely randomly.

Pair Corralation between Shanghai Material and Jiangsu Yueda

Assuming the 90 days trading horizon Shanghai Material Trading is expected to generate 1.7 times more return on investment than Jiangsu Yueda. However, Shanghai Material is 1.7 times more volatile than Jiangsu Yueda Investment. It trades about 0.05 of its potential returns per unit of risk. Jiangsu Yueda Investment is currently generating about 0.06 per unit of risk. If you would invest  903.00  in Shanghai Material Trading on October 23, 2024 and sell it today you would earn a total of  65.00  from holding Shanghai Material Trading or generate 7.2% return on investment over 90 days.

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

Shanghai Material Trading  vs.  Jiangsu Yueda Investment

Shanghai Material Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Material Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Material may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jiangsu Yueda Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yueda Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yueda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shanghai Material and Jiangsu Yueda

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

The idea behind Shanghai Material Trading and Jiangsu Yueda Investment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.