Correlation Between Shandong Sinoglory and Hunan Airbluer

Can any of the company-specific risk be diversified away by investing in both Shandong Sinoglory and Hunan Airbluer 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 Hunan Airbluer 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 Hunan Airbluer Environmental, you can compare the effects of market volatilities on Shandong Sinoglory and Hunan Airbluer 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 Hunan Airbluer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sinoglory and Hunan Airbluer.

Diversification Opportunities for Shandong Sinoglory and Hunan Airbluer

0.34

Correlation Coefficient

Shandong Sinoglory  Hunan Airbluer

Weak diversification

The 3 months correlation between Shandong and Hunan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sinoglory Health and Hunan Airbluer Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Airbluer Envir 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 Hunan Airbluer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Airbluer Envir has no effect on the direction of Shandong Sinoglory i.e., Shandong Sinoglory and Hunan Airbluer go up and down completely randomly.

Pair Corralation between Shandong Sinoglory and Hunan Airbluer

Assuming the 90 days trading horizon Shandong Sinoglory Health is expected to under-perform the Hunan Airbluer. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sinoglory Health is 2.0 times less risky than Hunan Airbluer. The stock trades about -0.01 of its potential returns per unit of risk. The Hunan Airbluer Environmental is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,125  in Hunan Airbluer Environmental on October 10, 2024 and sell it today you would earn a total of  1,702  from holding Hunan Airbluer Environmental or generate 54.46% return on investment over 90 days.

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

Shandong Sinoglory Health  vs.  Hunan Airbluer Environmental

Shandong Sinoglory Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hunan Airbluer Envir

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Airbluer Environmental are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Airbluer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sinoglory and Hunan Airbluer

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

The idea behind Shandong Sinoglory Health and Hunan Airbluer Environmental 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.