Correlation Between China Shenhua and Metallurgicalof China

Can any of the company-specific risk be diversified away by investing in both China Shenhua and Metallurgicalof China 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 China Shenhua and Metallurgicalof China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Shenhua Energy and Metallurgical of, you can compare the effects of market volatilities on China Shenhua and Metallurgicalof China 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 China Shenhua with a short position of Metallurgicalof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Metallurgicalof China.

Diversification Opportunities for China Shenhua and Metallurgicalof China

0.66

Correlation Coefficient

China Shenhua  Metallurgicalof China

Poor diversification

The 3 months correlation between China and Metallurgicalof is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and Metallurgical of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metallurgicalof China and China Shenhua 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 China Shenhua Energy are associated (or correlated) with Metallurgicalof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metallurgicalof China has no effect on the direction of China Shenhua i.e., China Shenhua and Metallurgicalof China go up and down completely randomly.

Pair Corralation between China Shenhua and Metallurgicalof China

Assuming the 90 days trading horizon China Shenhua Energy is expected to under-perform the Metallurgicalof China. In addition to that, China Shenhua is 1.27 times more volatile than Metallurgical of. It trades about -0.13 of its total potential returns per unit of risk. Metallurgical of is currently generating about -0.06 per unit of volatility. If you would invest  335.00  in Metallurgical of on December 27, 2024 and sell it today you would lose (13.00) from holding Metallurgical of or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

China Shenhua Energy  vs.  Metallurgical of

China Shenhua Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Shenhua Energy 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.

Metallurgicalof China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metallurgical of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Metallurgicalof China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Shenhua and Metallurgicalof China

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

The idea behind China Shenhua Energy and Metallurgical of 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.