Correlation Between Shandong Publishing and Hainan Mining

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

Diversification Opportunities for Shandong Publishing and Hainan Mining

0.45

Correlation Coefficient

Shandong Publishing  Hainan Mining

Very weak diversification

The 3 months correlation between Shandong and Hainan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Hainan Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Mining 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 Hainan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Mining has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Hainan Mining go up and down completely randomly.

Pair Corralation between Shandong Publishing and Hainan Mining

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Hainan Mining. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.04 times less risky than Hainan Mining. The stock trades about -0.03 of its potential returns per unit of risk. The Hainan Mining Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  692.00  in Hainan Mining Co on October 25, 2024 and sell it today you would lose (5.00) from holding Hainan Mining Co or give up 0.72% of portfolio value over 90 days.

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

Shandong Publishing Media  vs.  Hainan Mining Co

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.

Hainan Mining

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Shandong Publishing Media and Hainan Mining Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.