Correlation Between Shaanxi Construction and Metallurgical

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

Diversification Opportunities for Shaanxi Construction and Metallurgical

0.44

Correlation Coefficient

Shaanxi Construction  Metallurgical

Very weak diversification

The 3 months correlation between Shaanxi and Metallurgical is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Metallurgical of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metallurgical 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 Metallurgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metallurgical has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Metallurgical go up and down completely randomly.

Pair Corralation between Shaanxi Construction and Metallurgical

Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to under-perform the Metallurgical. In addition to that, Shaanxi Construction is 1.85 times more volatile than Metallurgical of. It trades about -0.09 of its total potential returns per unit of risk. Metallurgical of is currently generating about -0.12 per unit of volatility. If you would invest  349.00  in Metallurgical of on October 6, 2024 and sell it today you would lose (36.00) from holding Metallurgical of or give up 10.32% of portfolio value over 90 days.

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

Shaanxi Construction Machinery  vs.  Metallurgical of

Shaanxi Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Construction Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Metallurgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metallurgical of 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 Metallurgical

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

The idea behind Shaanxi Construction Machinery and Metallurgical of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.