Correlation Between Ping An and Shandong Himile

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

By analyzing existing cross correlation between Ping An Insurance and Shandong Himile Mechanical, you can compare the effects of market volatilities on Ping An and Shandong Himile 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 Ping An with a short position of Shandong Himile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Shandong Himile.

Diversification Opportunities for Ping An and Shandong Himile

-0.08

Correlation Coefficient

Ping An  Shandong Himile

Good diversification

The 3 months correlation between Ping and Shandong is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Shandong Himile Mechanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Himile Mech and Ping An 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 Ping An Insurance are associated (or correlated) with Shandong Himile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Himile Mech has no effect on the direction of Ping An i.e., Ping An and Shandong Himile go up and down completely randomly.

Pair Corralation between Ping An and Shandong Himile

Assuming the 90 days trading horizon Ping An is expected to generate 11.51 times less return on investment than Shandong Himile. In addition to that, Ping An is 1.03 times more volatile than Shandong Himile Mechanical. It trades about 0.01 of its total potential returns per unit of risk. Shandong Himile Mechanical is currently generating about 0.1 per unit of volatility. If you would invest  2,457  in Shandong Himile Mechanical on October 11, 2024 and sell it today you would earn a total of  2,728  from holding Shandong Himile Mechanical or generate 111.03% return on investment over 90 days.

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

Ping An Insurance  vs.  Shandong Himile Mechanical

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance 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.

Shandong Himile Mech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Himile Mechanical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Himile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Shandong Himile

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

The idea behind Ping An Insurance and Shandong Himile Mechanical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.