Correlation Between China Molybdenum and Shandong Sanyuan

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

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

Diversification Opportunities for China Molybdenum and Shandong Sanyuan

0.29

Correlation Coefficient

China Molybdenum  Shandong Sanyuan

Modest diversification

The 3 months correlation between China and Shandong is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and Shandong Sanyuan Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sanyuan Bio and China Molybdenum 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 China Molybdenum Co are associated (or correlated) with Shandong Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sanyuan Bio has no effect on the direction of China Molybdenum i.e., China Molybdenum and Shandong Sanyuan go up and down completely randomly.

Pair Corralation between China Molybdenum and Shandong Sanyuan

Assuming the 90 days trading horizon China Molybdenum Co is expected to generate 0.6 times more return on investment than Shandong Sanyuan. However, China Molybdenum Co is 1.66 times less risky than Shandong Sanyuan. It trades about -0.29 of its potential returns per unit of risk. Shandong Sanyuan Biotechnology is currently generating about -0.22 per unit of risk. If you would invest  742.00  in China Molybdenum Co on October 7, 2024 and sell it today you would lose (65.00) from holding China Molybdenum Co or give up 8.76% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Shandong Sanyuan Biotechnology

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Sanyuan Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Sanyuan Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Molybdenum and Shandong Sanyuan

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

The idea behind China Molybdenum Co and Shandong Sanyuan Biotechnology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.