Correlation Between Shandong Sinoglory and Zhengzhou Qianweiyangchu

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

By analyzing existing cross correlation between Shandong Sinoglory Health and Zhengzhou Qianweiyangchu Food, you can compare the effects of market volatilities on Shandong Sinoglory and Zhengzhou Qianweiyangchu 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 Shandong Sinoglory with a short position of Zhengzhou Qianweiyangchu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sinoglory and Zhengzhou Qianweiyangchu.

Diversification Opportunities for Shandong Sinoglory and Zhengzhou Qianweiyangchu

0.94

Correlation Coefficient

Shandong Sinoglory  Zhengzhou Qianweiyangchu

Almost no diversification

The 3 months correlation between Shandong and Zhengzhou is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sinoglory Health and Zhengzhou Qianweiyangchu Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Qianweiyangchu and Shandong Sinoglory 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 Shandong Sinoglory Health are associated (or correlated) with Zhengzhou Qianweiyangchu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Qianweiyangchu has no effect on the direction of Shandong Sinoglory i.e., Shandong Sinoglory and Zhengzhou Qianweiyangchu go up and down completely randomly.

Pair Corralation between Shandong Sinoglory and Zhengzhou Qianweiyangchu

Assuming the 90 days trading horizon Shandong Sinoglory Health is expected to under-perform the Zhengzhou Qianweiyangchu. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sinoglory Health is 1.73 times less risky than Zhengzhou Qianweiyangchu. The stock trades about -0.06 of its potential returns per unit of risk. The Zhengzhou Qianweiyangchu Food is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,250  in Zhengzhou Qianweiyangchu Food on September 26, 2024 and sell it today you would lose (119.00) from holding Zhengzhou Qianweiyangchu Food or give up 3.66% of portfolio value over 90 days.

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

Shandong Sinoglory Health  vs.  Zhengzhou Qianweiyangchu Food

Shandong Sinoglory Health

Risk-Adjusted Performance

4 of 100

Modest

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

Zhengzhou Qianweiyangchu

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Qianweiyangchu Food are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhengzhou Qianweiyangchu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sinoglory and Zhengzhou Qianweiyangchu

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

The idea behind Shandong Sinoglory Health and Zhengzhou Qianweiyangchu Food 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.