Correlation Between Xinhua Winshare and Shanghai Yanpu

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Can any of the company-specific risk be diversified away by investing in both Xinhua Winshare and Shanghai Yanpu 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 Xinhua Winshare and Shanghai Yanpu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xinhua Winshare Publishing and Shanghai Yanpu Metal, you can compare the effects of market volatilities on Xinhua Winshare and Shanghai Yanpu 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 Xinhua Winshare with a short position of Shanghai Yanpu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinhua Winshare and Shanghai Yanpu.

Diversification Opportunities for Xinhua Winshare and Shanghai Yanpu

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Xinhua and Shanghai is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xinhua Winshare Publishing and Shanghai Yanpu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yanpu Metal and Xinhua Winshare 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 Xinhua Winshare Publishing are associated (or correlated) with Shanghai Yanpu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yanpu Metal has no effect on the direction of Xinhua Winshare i.e., Xinhua Winshare and Shanghai Yanpu go up and down completely randomly.

Pair Corralation between Xinhua Winshare and Shanghai Yanpu

Assuming the 90 days trading horizon Xinhua Winshare Publishing is expected to generate 0.47 times more return on investment than Shanghai Yanpu. However, Xinhua Winshare Publishing is 2.11 times less risky than Shanghai Yanpu. It trades about 0.45 of its potential returns per unit of risk. Shanghai Yanpu Metal is currently generating about 0.21 per unit of risk. If you would invest  1,382  in Xinhua Winshare Publishing on September 23, 2024 and sell it today you would earn a total of  199.00  from holding Xinhua Winshare Publishing or generate 14.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Xinhua Winshare Publishing  vs.  Shanghai Yanpu Metal

 Performance 
       Timeline  
Xinhua Winshare Publ 

Risk-Adjusted Performance

9 of 100

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

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yanpu Metal are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yanpu sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinhua Winshare and Shanghai Yanpu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xinhua Winshare and Shanghai Yanpu

The main advantage of trading using opposite Xinhua Winshare and Shanghai Yanpu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinhua Winshare position performs unexpectedly, Shanghai Yanpu 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 Yanpu will offset losses from the drop in Shanghai Yanpu's long position.
The idea behind Xinhua Winshare Publishing and Shanghai Yanpu Metal 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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