Correlation Between China Publishing and Shanghai OPM

Can any of the company-specific risk be diversified away by investing in both China Publishing and Shanghai OPM 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 Shanghai OPM 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 Shanghai OPM Biosciences, you can compare the effects of market volatilities on China Publishing and Shanghai OPM 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 Shanghai OPM. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Publishing and Shanghai OPM.

Diversification Opportunities for China Publishing and Shanghai OPM

0.72

Correlation Coefficient

China Publishing  Shanghai OPM

Poor diversification

The 3 months correlation between China and Shanghai is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Publishing Media and Shanghai OPM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai OPM Biosciences 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 Shanghai OPM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai OPM Biosciences has no effect on the direction of China Publishing i.e., China Publishing and Shanghai OPM go up and down completely randomly.

Pair Corralation between China Publishing and Shanghai OPM

Assuming the 90 days trading horizon China Publishing is expected to generate 16.43 times less return on investment than Shanghai OPM. But when comparing it to its historical volatility, China Publishing Media is 1.24 times less risky than Shanghai OPM. It trades about 0.01 of its potential returns per unit of risk. Shanghai OPM Biosciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,139  in Shanghai OPM Biosciences on October 22, 2024 and sell it today you would earn a total of  777.00  from holding Shanghai OPM Biosciences or generate 24.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

China Publishing Media  vs.  Shanghai OPM Biosciences

China Publishing Media

Risk-Adjusted Performance

0 of 100

Weak

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

Shanghai OPM Biosciences

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with China Publishing and Shanghai OPM

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

The idea behind China Publishing Media and Shanghai OPM Biosciences 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.