Correlation Between Shandong Publishing and PKU HealthCare

Can any of the company-specific risk be diversified away by investing in both Shandong Publishing and PKU HealthCare 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 Shandong Publishing and PKU HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Publishing Media and PKU HealthCare Corp, you can compare the effects of market volatilities on Shandong Publishing and PKU HealthCare 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 Shandong Publishing with a short position of PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and PKU HealthCare.

Diversification Opportunities for Shandong Publishing and PKU HealthCare

-0.17

Correlation Coefficient

Shandong Publishing  PKU HealthCare

Good diversification

The 3 months correlation between Shandong and PKU is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and PKU HealthCare go up and down completely randomly.

Pair Corralation between Shandong Publishing and PKU HealthCare

Assuming the 90 days trading horizon Shandong Publishing Media is expected to generate 0.68 times more return on investment than PKU HealthCare. However, Shandong Publishing Media is 1.46 times less risky than PKU HealthCare. It trades about 0.1 of its potential returns per unit of risk. PKU HealthCare Corp is currently generating about -0.02 per unit of risk. If you would invest  1,078  in Shandong Publishing Media on October 7, 2024 and sell it today you would earn a total of  92.00  from holding Shandong Publishing Media or generate 8.53% return on investment over 90 days.

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

Shandong Publishing Media  vs.  PKU HealthCare Corp

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Publishing Media 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.

PKU HealthCare Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shandong Publishing and PKU HealthCare

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

The idea behind Shandong Publishing Media and PKU HealthCare Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.