Correlation Between Shanghai Shuixing and Mengtian Home

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

By analyzing existing cross correlation between Shanghai Shuixing Home and Mengtian Home Group, you can compare the effects of market volatilities on Shanghai Shuixing and Mengtian Home 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 Shanghai Shuixing with a short position of Mengtian Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Shuixing and Mengtian Home.

Diversification Opportunities for Shanghai Shuixing and Mengtian Home

0.83

Correlation Coefficient

Shanghai Shuixing  Mengtian Home

Very poor diversification

The 3 months correlation between Shanghai and Mengtian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Shuixing Home and Mengtian Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mengtian Home Group and Shanghai Shuixing 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 Shanghai Shuixing Home are associated (or correlated) with Mengtian Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mengtian Home Group has no effect on the direction of Shanghai Shuixing i.e., Shanghai Shuixing and Mengtian Home go up and down completely randomly.

Pair Corralation between Shanghai Shuixing and Mengtian Home

Assuming the 90 days trading horizon Shanghai Shuixing is expected to generate 1.36 times less return on investment than Mengtian Home. In addition to that, Shanghai Shuixing is 1.22 times more volatile than Mengtian Home Group. It trades about 0.19 of its total potential returns per unit of risk. Mengtian Home Group is currently generating about 0.31 per unit of volatility. If you would invest  880.00  in Mengtian Home Group on September 18, 2024 and sell it today you would earn a total of  607.00  from holding Mengtian Home Group or generate 68.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Shanghai Shuixing Home  vs.  Mengtian Home Group

Shanghai Shuixing Home

Risk-Adjusted Performance

14 of 100

Good

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

Mengtian Home Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Shuixing and Mengtian Home

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

The idea behind Shanghai Shuixing Home and Mengtian Home Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.