Correlation Between Xingguang Agricultural and Shanghai OPM

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

By analyzing existing cross correlation between Xingguang Agricultural Mach and Shanghai OPM Biosciences, you can compare the effects of market volatilities on Xingguang Agricultural and Shanghai OPM 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 Xingguang Agricultural with a short position of Shanghai OPM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xingguang Agricultural and Shanghai OPM.

Diversification Opportunities for Xingguang Agricultural and Shanghai OPM

0.7

Correlation Coefficient

Xingguang Agricultural  Shanghai OPM

Poor diversification

The 3 months correlation between Xingguang and Shanghai is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Shanghai OPM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai OPM Biosciences and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with Shanghai OPM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai OPM Biosciences has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Shanghai OPM go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Shanghai OPM

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to under-perform the Shanghai OPM. In addition to that, Xingguang Agricultural is 2.75 times more volatile than Shanghai OPM Biosciences. It trades about -0.27 of its total potential returns per unit of risk. Shanghai OPM Biosciences is currently generating about -0.54 per unit of volatility. If you would invest  4,354  in Shanghai OPM Biosciences on October 11, 2024 and sell it today you would lose (786.00) from holding Shanghai OPM Biosciences or give up 18.05% of portfolio value over 90 days.

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

Xingguang Agricultural Mach  vs.  Shanghai OPM Biosciences

Xingguang Agricultural

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xingguang Agricultural Mach are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xingguang Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai OPM Biosciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai OPM Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai OPM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xingguang Agricultural and Shanghai OPM

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

The idea behind Xingguang Agricultural Mach and Shanghai OPM Biosciences 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 CEOs Directory module to screen CEOs from public companies around the world.