Correlation Between Ping An and Shandong Longda

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

Diversification Opportunities for Ping An and Shandong Longda

0.18

Correlation Coefficient

Ping An  Shandong Longda

Average diversification

The 3 months correlation between Ping and Shandong is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Shandong Longda Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longda Meat 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 Longda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longda Meat has no effect on the direction of Ping An i.e., Ping An and Shandong Longda go up and down completely randomly.

Pair Corralation between Ping An and Shandong Longda

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Shandong Longda. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.26 times less risky than Shandong Longda. The stock trades about -0.11 of its potential returns per unit of risk. The Shandong Longda Meat is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  706.00  in Shandong Longda Meat on October 27, 2024 and sell it today you would lose (75.00) from holding Shandong Longda Meat or give up 10.62% of portfolio value over 90 days.

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

Ping An Insurance  vs.  Shandong Longda Meat

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 Longda Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Longda Meat 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.

Pair Trading with Ping An and Shandong Longda

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

The idea behind Ping An Insurance and Shandong Longda Meat 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 CEOs Directory module to screen CEOs from public companies around the world.