Correlation Between Metallurgical and Shanghai Action

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

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

Diversification Opportunities for Metallurgical and Shanghai Action

-0.08

Correlation Coefficient

Metallurgical  Shanghai Action

Good diversification

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

Pair Corralation between Metallurgical and Shanghai Action

Assuming the 90 days trading horizon Metallurgical of is expected to generate 0.93 times more return on investment than Shanghai Action. However, Metallurgical of is 1.07 times less risky than Shanghai Action. It trades about -0.06 of its potential returns per unit of risk. Shanghai Action Education is currently generating about -0.08 per unit of risk. If you would invest  355.00  in Metallurgical of on October 7, 2024 and sell it today you would lose (42.00) from holding Metallurgical of or give up 11.83% of portfolio value over 90 days.

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

Metallurgical of  vs.  Shanghai Action Education

Metallurgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metallurgical of 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.

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Metallurgical and Shanghai Action

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

The idea behind Metallurgical of and Shanghai Action Education 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.