Correlation Between Duzhe Publishing and Henan Shenhuo

Can any of the company-specific risk be diversified away by investing in both Duzhe Publishing and Henan Shenhuo 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 Duzhe Publishing and Henan Shenhuo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duzhe Publishing Media and Henan Shenhuo Coal, you can compare the effects of market volatilities on Duzhe Publishing and Henan Shenhuo 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 Duzhe Publishing with a short position of Henan Shenhuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duzhe Publishing and Henan Shenhuo.

Diversification Opportunities for Duzhe Publishing and Henan Shenhuo

0.07

Correlation Coefficient

Duzhe Publishing  Henan Shenhuo

Significant diversification

The 3 months correlation between Duzhe and Henan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Duzhe Publishing Media and Henan Shenhuo Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Shenhuo Coal and Duzhe Publishing 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 Duzhe Publishing Media are associated (or correlated) with Henan Shenhuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Shenhuo Coal has no effect on the direction of Duzhe Publishing i.e., Duzhe Publishing and Henan Shenhuo go up and down completely randomly.

Pair Corralation between Duzhe Publishing and Henan Shenhuo

Assuming the 90 days trading horizon Duzhe Publishing Media is expected to generate 1.24 times more return on investment than Henan Shenhuo. However, Duzhe Publishing is 1.24 times more volatile than Henan Shenhuo Coal. It trades about 0.02 of its potential returns per unit of risk. Henan Shenhuo Coal is currently generating about 0.03 per unit of risk. If you would invest  564.00  in Duzhe Publishing Media on September 28, 2024 and sell it today you would earn a total of  68.00  from holding Duzhe Publishing Media or generate 12.06% return on investment over 90 days.

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

Duzhe Publishing Media  vs.  Henan Shenhuo Coal

Duzhe Publishing Media

Risk-Adjusted Performance

4 of 100

Insignificant

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

Henan Shenhuo Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Shenhuo Coal 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Duzhe Publishing and Henan Shenhuo

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

The idea behind Duzhe Publishing Media and Henan Shenhuo Coal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.