Correlation Between AUPU Home and Shandong Longda

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

By analyzing existing cross correlation between AUPU Home Style and Shandong Longda Meat, you can compare the effects of market volatilities on AUPU Home and Shandong Longda 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 AUPU Home with a short position of Shandong Longda. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUPU Home and Shandong Longda.

Diversification Opportunities for AUPU Home and Shandong Longda

0.5

Correlation Coefficient

AUPU Home  Shandong Longda

Very weak diversification

The 3 months correlation between AUPU and Shandong is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AUPU Home Style and Shandong Longda Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Longda Meat and AUPU Home 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 AUPU Home Style are associated (or correlated) with Shandong Longda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Longda Meat has no effect on the direction of AUPU Home i.e., AUPU Home and Shandong Longda go up and down completely randomly.

Pair Corralation between AUPU Home and Shandong Longda

Assuming the 90 days trading horizon AUPU Home is expected to generate 1.14 times less return on investment than Shandong Longda. In addition to that, AUPU Home is 1.17 times more volatile than Shandong Longda Meat. It trades about 0.01 of its total potential returns per unit of risk. Shandong Longda Meat is currently generating about 0.02 per unit of volatility. If you would invest  728.00  in Shandong Longda Meat on October 9, 2024 and sell it today you would earn a total of  14.00  from holding Shandong Longda Meat or generate 1.92% return on investment over 90 days.

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

AUPU Home Style  vs.  Shandong Longda Meat

AUPU Home Style

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AUPU Home Style are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AUPU Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shandong Longda Meat

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longda Meat are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AUPU Home and Shandong Longda

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

The idea behind AUPU Home Style and Shandong Longda Meat 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.