Correlation Between Shanghai Xinhua and Marssenger Kitchenware

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

By analyzing existing cross correlation between Shanghai Xinhua Media and Marssenger Kitchenware Co, you can compare the effects of market volatilities on Shanghai Xinhua and Marssenger Kitchenware 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 Xinhua with a short position of Marssenger Kitchenware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Xinhua and Marssenger Kitchenware.

Diversification Opportunities for Shanghai Xinhua and Marssenger Kitchenware

0.46

Correlation Coefficient

Shanghai Xinhua  Marssenger Kitchenware

Very weak diversification

The 3 months correlation between Shanghai and Marssenger is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Xinhua Media and Marssenger Kitchenware Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marssenger Kitchenware and Shanghai Xinhua 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 Xinhua Media are associated (or correlated) with Marssenger Kitchenware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marssenger Kitchenware has no effect on the direction of Shanghai Xinhua i.e., Shanghai Xinhua and Marssenger Kitchenware go up and down completely randomly.

Pair Corralation between Shanghai Xinhua and Marssenger Kitchenware

Assuming the 90 days trading horizon Shanghai Xinhua Media is expected to generate 1.06 times more return on investment than Marssenger Kitchenware. However, Shanghai Xinhua is 1.06 times more volatile than Marssenger Kitchenware Co. It trades about 0.04 of its potential returns per unit of risk. Marssenger Kitchenware Co is currently generating about -0.04 per unit of risk. If you would invest  386.00  in Shanghai Xinhua Media on October 10, 2024 and sell it today you would earn a total of  208.00  from holding Shanghai Xinhua Media or generate 53.89% return on investment over 90 days.

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

Shanghai Xinhua Media  vs.  Marssenger Kitchenware Co

Shanghai Xinhua Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Xinhua Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Xinhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Marssenger Kitchenware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marssenger Kitchenware Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shanghai Xinhua and Marssenger Kitchenware

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

The idea behind Shanghai Xinhua Media and Marssenger Kitchenware 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.