Correlation Between Shaanxi Construction and Qiaoyin Environmental

Can any of the company-specific risk be diversified away by investing in both Shaanxi Construction and Qiaoyin Environmental 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 Shaanxi Construction and Qiaoyin Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaanxi Construction Machinery and Qiaoyin Environmental Tech, you can compare the effects of market volatilities on Shaanxi Construction and Qiaoyin Environmental 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 Shaanxi Construction with a short position of Qiaoyin Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Qiaoyin Environmental.

Diversification Opportunities for Shaanxi Construction and Qiaoyin Environmental

0.36

Correlation Coefficient

Shaanxi Construction  Qiaoyin Environmental

Weak diversification

The 3 months correlation between Shaanxi and Qiaoyin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental and Shaanxi Construction 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 Shaanxi Construction Machinery are associated (or correlated) with Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Shaanxi Construction and Qiaoyin Environmental

Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to generate 1.59 times more return on investment than Qiaoyin Environmental. However, Shaanxi Construction is 1.59 times more volatile than Qiaoyin Environmental Tech. It trades about 0.01 of its potential returns per unit of risk. Qiaoyin Environmental Tech is currently generating about -0.04 per unit of risk. If you would invest  343.00  in Shaanxi Construction Machinery on October 25, 2024 and sell it today you would lose (9.00) from holding Shaanxi Construction Machinery or give up 2.62% of portfolio value over 90 days.

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

Shaanxi Construction Machinery  vs.  Qiaoyin Environmental Tech

Shaanxi Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Qiaoyin Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shaanxi Construction and Qiaoyin Environmental

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

The idea behind Shaanxi Construction Machinery and Qiaoyin Environmental Tech 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.