Correlation Between Great Sun and Shandong Mining

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

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

Diversification Opportunities for Great Sun and Shandong Mining

0.81

Correlation Coefficient

Great Sun  Shandong Mining

Very poor diversification

The 3 months correlation between Great and Shandong is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Great Sun Foods Co and Shandong Mining Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Mining Machinery and Great Sun 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 Great Sun Foods Co are associated (or correlated) with Shandong Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Mining Machinery has no effect on the direction of Great Sun i.e., Great Sun and Shandong Mining go up and down completely randomly.

Pair Corralation between Great Sun and Shandong Mining

Assuming the 90 days trading horizon Great Sun is expected to generate 1.57 times less return on investment than Shandong Mining. In addition to that, Great Sun is 1.02 times more volatile than Shandong Mining Machinery. It trades about 0.2 of its total potential returns per unit of risk. Shandong Mining Machinery is currently generating about 0.32 per unit of volatility. If you would invest  213.00  in Shandong Mining Machinery on September 5, 2024 and sell it today you would earn a total of  223.00  from holding Shandong Mining Machinery or generate 104.69% return on investment over 90 days.

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

Great Sun Foods Co  vs.  Shandong Mining Machinery

Great Sun Foods

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Sun Foods Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Great Sun sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Mining Machinery

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Sun and Shandong Mining

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

The idea behind Great Sun Foods Co and Shandong Mining Machinery 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.