Correlation Between Shandong Publishing and Heilongjiang Transport

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

Diversification Opportunities for Shandong Publishing and Heilongjiang Transport

-0.47

Correlation Coefficient

Shandong Publishing  Heilongjiang Transport

Very good diversification

The 3 months correlation between Shandong and Heilongjiang is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport 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 Heilongjiang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Transport has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Shandong Publishing and Heilongjiang Transport

Assuming the 90 days trading horizon Shandong Publishing is expected to generate 124.21 times less return on investment than Heilongjiang Transport. But when comparing it to its historical volatility, Shandong Publishing Media is 1.06 times less risky than Heilongjiang Transport. It trades about 0.0 of its potential returns per unit of risk. Heilongjiang Transport Development is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Heilongjiang Transport Development on September 22, 2024 and sell it today you would earn a total of  87.00  from holding Heilongjiang Transport Development or generate 29.49% return on investment over 90 days.

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

Shandong Publishing Media  vs.  Heilongjiang Transport Develop

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 somewhat strong basic indicators, Shandong Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Heilongjiang Transport

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heilongjiang Transport Development are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heilongjiang Transport sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and Heilongjiang Transport

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

The idea behind Shandong Publishing Media and Heilongjiang Transport Development 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.