Correlation Between Peoples Insurance and Shandong Longda

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

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

Diversification Opportunities for Peoples Insurance and Shandong Longda

0.49

Correlation Coefficient

Peoples Insurance  Shandong Longda

Very weak diversification

The 3 months correlation between Peoples and Shandong is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Peoples Insurance of 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 Peoples Insurance 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 Peoples Insurance of 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 Peoples Insurance i.e., Peoples Insurance and Shandong Longda go up and down completely randomly.

Pair Corralation between Peoples Insurance and Shandong Longda

Assuming the 90 days trading horizon Peoples Insurance of is expected to generate 0.82 times more return on investment than Shandong Longda. However, Peoples Insurance of is 1.22 times less risky than Shandong Longda. It trades about -0.19 of its potential returns per unit of risk. Shandong Longda Meat is currently generating about -0.22 per unit of risk. If you would invest  745.00  in Peoples Insurance of on October 12, 2024 and sell it today you would lose (58.00) from holding Peoples Insurance of or give up 7.79% of portfolio value over 90 days.

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

Peoples Insurance of  vs.  Shandong Longda Meat

Peoples Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Peoples Insurance and Shandong Longda

The main advantage of trading using opposite Peoples Insurance and Shandong Longda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peoples Insurance 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 Peoples Insurance of 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.