Correlation Between Shaanxi Construction and Kunwu Jiuding

Can any of the company-specific risk be diversified away by investing in both Shaanxi Construction and Kunwu Jiuding 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 Kunwu Jiuding 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 Kunwu Jiuding Investment, you can compare the effects of market volatilities on Shaanxi Construction and Kunwu Jiuding 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 Kunwu Jiuding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Kunwu Jiuding.

Diversification Opportunities for Shaanxi Construction and Kunwu Jiuding

0.22

Correlation Coefficient

Shaanxi Construction  Kunwu Jiuding

Modest diversification

The 3 months correlation between Shaanxi and Kunwu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Kunwu Jiuding Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunwu Jiuding Investment 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 Kunwu Jiuding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunwu Jiuding Investment has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Kunwu Jiuding go up and down completely randomly.

Pair Corralation between Shaanxi Construction and Kunwu Jiuding

Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to generate 1.6 times more return on investment than Kunwu Jiuding. However, Shaanxi Construction is 1.6 times more volatile than Kunwu Jiuding Investment. It trades about -0.11 of its potential returns per unit of risk. Kunwu Jiuding Investment is currently generating about -0.32 per unit of risk. If you would invest  355.00  in Shaanxi Construction Machinery on October 10, 2024 and sell it today you would lose (40.00) from holding Shaanxi Construction Machinery or give up 11.27% 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.  Kunwu Jiuding Investment

Shaanxi Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Construction Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Kunwu Jiuding Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kunwu Jiuding Investment 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 Shaanxi Construction and Kunwu Jiuding

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

The idea behind Shaanxi Construction Machinery and Kunwu Jiuding 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.