Correlation Between Shandong Publishing and Changchun Faway

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

Diversification Opportunities for Shandong Publishing and Changchun Faway

-0.36

Correlation Coefficient

Shandong Publishing  Changchun Faway

Very good diversification

The 3 months correlation between Shandong and Changchun is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Changchun Faway Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun Faway Auto 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 Changchun Faway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun Faway Auto has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Changchun Faway go up and down completely randomly.

Pair Corralation between Shandong Publishing and Changchun Faway

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Changchun Faway. In addition to that, Shandong Publishing is 1.32 times more volatile than Changchun Faway Automobile. It trades about -0.14 of its total potential returns per unit of risk. Changchun Faway Automobile is currently generating about 0.05 per unit of volatility. If you would invest  900.00  in Changchun Faway Automobile on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Changchun Faway Automobile or generate 3.33% 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.  Changchun Faway Automobile

Shandong Publishing Media

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Changchun Faway Auto

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun Faway Automobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changchun Faway 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 Changchun Faway

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

The idea behind Shandong Publishing Media and Changchun Faway Automobile 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 Transaction History module to view history of all your transactions and understand their impact on performance.