Correlation Between Shandong Publishing and Sinosteel Engineering

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

Diversification Opportunities for Shandong Publishing and Sinosteel Engineering

-0.81

Correlation Coefficient

Shandong Publishing  Sinosteel Engineering

Pay attention - limited upside

The 3 months correlation between Shandong and Sinosteel is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Sinosteel Engineering and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Engineering and 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 Sinosteel Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Engineering and has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Sinosteel Engineering go up and down completely randomly.

Pair Corralation between Shandong Publishing and Sinosteel Engineering

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Sinosteel Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.17 times less risky than Sinosteel Engineering. The stock trades about -0.08 of its potential returns per unit of risk. The Sinosteel Engineering and is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  538.00  in Sinosteel Engineering and on September 3, 2024 and sell it today you would earn a total of  172.00  from holding Sinosteel Engineering and or generate 31.97% return on investment over 90 days.

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

Shandong Publishing Media  vs.  Sinosteel Engineering and

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.

Sinosteel Engineering and

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Engineering and are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and Sinosteel Engineering

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

The idea behind Shandong Publishing Media and Sinosteel Engineering and 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.