Correlation Between Shanghai Material and Piotech

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

Diversification Opportunities for Shanghai Material and Piotech

0.07

Correlation Coefficient

Shanghai Material  Piotech

Significant diversification

The 3 months correlation between Shanghai and Piotech is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Material Trading and Piotech Inc A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piotech Inc A 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 Piotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piotech Inc A has no effect on the direction of Shanghai Material i.e., Shanghai Material and Piotech go up and down completely randomly.

Pair Corralation between Shanghai Material and Piotech

Assuming the 90 days trading horizon Shanghai Material Trading is expected to under-perform the Piotech. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Material Trading is 1.63 times less risky than Piotech. The stock trades about -0.04 of its potential returns per unit of risk. The Piotech Inc A is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16,322  in Piotech Inc A on December 26, 2024 and sell it today you would earn a total of  899.00  from holding Piotech Inc A or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Shanghai Material Trading  vs.  Piotech Inc A

Shanghai Material Trading

Risk-Adjusted Performance

Very Weak

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

Piotech Inc A

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Shanghai Material and Piotech

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

The idea behind Shanghai Material Trading and Piotech Inc A 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..