Correlation Between Ming Yang and Shanghai Fudan

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

By analyzing existing cross correlation between Ming Yang Smart and Shanghai Fudan Microelectronics, you can compare the effects of market volatilities on Ming Yang and Shanghai Fudan 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 Ming Yang with a short position of Shanghai Fudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and Shanghai Fudan.

Diversification Opportunities for Ming Yang and Shanghai Fudan

0.61

Correlation Coefficient

Ming Yang  Shanghai Fudan

Poor diversification

The 3 months correlation between Ming and Shanghai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and Shanghai Fudan Microelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Fudan Micro and Ming Yang 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 Ming Yang Smart are associated (or correlated) with Shanghai Fudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Fudan Micro has no effect on the direction of Ming Yang i.e., Ming Yang and Shanghai Fudan go up and down completely randomly.

Pair Corralation between Ming Yang and Shanghai Fudan

Assuming the 90 days trading horizon Ming Yang Smart is expected to under-perform the Shanghai Fudan. In addition to that, Ming Yang is 1.05 times more volatile than Shanghai Fudan Microelectronics. It trades about -0.14 of its total potential returns per unit of risk. Shanghai Fudan Microelectronics is currently generating about 0.08 per unit of volatility. If you would invest  4,162  in Shanghai Fudan Microelectronics on September 28, 2024 and sell it today you would earn a total of  128.00  from holding Shanghai Fudan Microelectronics or generate 3.08% return on investment over 90 days.

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

Ming Yang Smart  vs.  Shanghai Fudan Microelectronic

Ming Yang Smart

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Yang Smart are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ming Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Fudan Micro

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Fudan Microelectronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Fudan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and Shanghai Fudan

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

The idea behind Ming Yang Smart and Shanghai Fudan Microelectronics 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.