Correlation Between China Publishing and Shandong Polymer

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

By analyzing existing cross correlation between China Publishing Media and Shandong Polymer Biochemicals, you can compare the effects of market volatilities on China Publishing and Shandong Polymer 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 China Publishing with a short position of Shandong Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Publishing and Shandong Polymer.

Diversification Opportunities for China Publishing and Shandong Polymer

0.45

Correlation Coefficient

China Publishing  Shandong Polymer

Very weak diversification

The 3 months correlation between China and Shandong is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Publishing Media and Shandong Polymer Biochemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Polymer Bio and China Publishing 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 China Publishing Media are associated (or correlated) with Shandong Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Polymer Bio has no effect on the direction of China Publishing i.e., China Publishing and Shandong Polymer go up and down completely randomly.

Pair Corralation between China Publishing and Shandong Polymer

Assuming the 90 days trading horizon China Publishing Media is expected to under-perform the Shandong Polymer. In addition to that, China Publishing is 1.04 times more volatile than Shandong Polymer Biochemicals. It trades about -0.1 of its total potential returns per unit of risk. Shandong Polymer Biochemicals is currently generating about 0.12 per unit of volatility. If you would invest  416.00  in Shandong Polymer Biochemicals on December 26, 2024 and sell it today you would earn a total of  52.00  from holding Shandong Polymer Biochemicals or generate 12.5% return on investment over 90 days.

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

China Publishing Media  vs.  Shandong Polymer Biochemicals

China Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Publishing Media 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 Polymer Bio

Risk-Adjusted Performance

OK

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

Pair Trading with China Publishing and Shandong Polymer

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

The idea behind China Publishing Media and Shandong Polymer Biochemicals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.