Correlation Between Northern United and Shanghai Action

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

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

Diversification Opportunities for Northern United and Shanghai Action

0.03

Correlation Coefficient

Northern United  Shanghai Action

Significant diversification

The 3 months correlation between Northern and Shanghai is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Northern United Publishing 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 Northern United 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 Northern United Publishing 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 Northern United i.e., Northern United and Shanghai Action go up and down completely randomly.

Pair Corralation between Northern United and Shanghai Action

Assuming the 90 days trading horizon Northern United Publishing is expected to under-perform the Shanghai Action. In addition to that, Northern United is 1.25 times more volatile than Shanghai Action Education. It trades about -0.04 of its total potential returns per unit of risk. Shanghai Action Education is currently generating about 0.07 per unit of volatility. If you would invest  3,617  in Shanghai Action Education on December 1, 2024 and sell it today you would earn a total of  283.00  from holding Shanghai Action Education or generate 7.82% return on investment over 90 days.

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

Northern United Publishing  vs.  Shanghai Action Education

Northern United Publ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern United Publishing 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Action Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Action may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Northern United and Shanghai Action

The main advantage of trading using opposite Northern United and Shanghai Action positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern United 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 Northern United Publishing 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.