Correlation Between Hengdian Entertainment and Shandong Polymer

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

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

Diversification Opportunities for Hengdian Entertainment and Shandong Polymer

0.31

Correlation Coefficient

Hengdian Entertainment  Shandong Polymer

Weak diversification

The 3 months correlation between Hengdian and Shandong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hengdian Entertainment Co 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 Hengdian Entertainment 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 Hengdian Entertainment Co 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 Hengdian Entertainment i.e., Hengdian Entertainment and Shandong Polymer go up and down completely randomly.

Pair Corralation between Hengdian Entertainment and Shandong Polymer

Assuming the 90 days trading horizon Hengdian Entertainment Co is expected to under-perform the Shandong Polymer. In addition to that, Hengdian Entertainment is 2.2 times more volatile than Shandong Polymer Biochemicals. It trades about -0.06 of its total potential returns per unit of risk. Shandong Polymer Biochemicals is currently generating about 0.06 per unit of volatility. If you would invest  440.00  in Shandong Polymer Biochemicals on December 27, 2024 and sell it today you would earn a total of  24.00  from holding Shandong Polymer Biochemicals or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Hengdian Entertainment Co  vs.  Shandong Polymer Biochemicals

Hengdian Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengdian Entertainment Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Polymer Bio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Polymer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hengdian Entertainment and Shandong Polymer

The main advantage of trading using opposite Hengdian Entertainment and Shandong Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengdian Entertainment 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 Hengdian Entertainment Co 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.