Correlation Between Shandong Publishing and Tianshan Aluminum

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

Diversification Opportunities for Shandong Publishing and Tianshan Aluminum

-0.26

Correlation Coefficient

Shandong Publishing  Tianshan Aluminum

Very good diversification

The 3 months correlation between Shandong and Tianshan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Tianshan Aluminum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshan Aluminum 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 Tianshan Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshan Aluminum has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Tianshan Aluminum go up and down completely randomly.

Pair Corralation between Shandong Publishing and Tianshan Aluminum

Assuming the 90 days trading horizon Shandong Publishing Media is expected to generate 2.11 times more return on investment than Tianshan Aluminum. However, Shandong Publishing is 2.11 times more volatile than Tianshan Aluminum Group. It trades about 0.16 of its potential returns per unit of risk. Tianshan Aluminum Group is currently generating about -0.09 per unit of risk. If you would invest  1,068  in Shandong Publishing Media on October 6, 2024 and sell it today you would earn a total of  102.00  from holding Shandong Publishing Media or generate 9.55% 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.  Tianshan Aluminum Group

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.

Tianshan Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianshan Aluminum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tianshan Aluminum 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 Tianshan Aluminum

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

The idea behind Shandong Publishing Media and Tianshan Aluminum Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.