Correlation Between Shanghai Action and Bohai Leasing

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

By analyzing existing cross correlation between Shanghai Action Education and Bohai Leasing Co, you can compare the effects of market volatilities on Shanghai Action and Bohai Leasing 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 Action with a short position of Bohai Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Action and Bohai Leasing.

Diversification Opportunities for Shanghai Action and Bohai Leasing

-0.71

Correlation Coefficient

Shanghai Action  Bohai Leasing

Pay attention - limited upside

The 3 months correlation between Shanghai and Bohai is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Bohai Leasing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bohai Leasing and Shanghai Action 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 Action Education are associated (or correlated) with Bohai Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bohai Leasing has no effect on the direction of Shanghai Action i.e., Shanghai Action and Bohai Leasing go up and down completely randomly.

Pair Corralation between Shanghai Action and Bohai Leasing

Assuming the 90 days trading horizon Shanghai Action Education is expected to generate 1.17 times more return on investment than Bohai Leasing. However, Shanghai Action is 1.17 times more volatile than Bohai Leasing Co. It trades about 0.2 of its potential returns per unit of risk. Bohai Leasing Co is currently generating about -0.17 per unit of risk. If you would invest  3,408  in Shanghai Action Education on December 26, 2024 and sell it today you would earn a total of  844.00  from holding Shanghai Action Education or generate 24.77% return on investment over 90 days.

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

Shanghai Action Education  vs.  Bohai Leasing Co

Shanghai Action Education

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Action Education are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Action sustained solid returns over the last few months and may actually be approaching a breakup point.

Bohai Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bohai Leasing 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shanghai Action and Bohai Leasing

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

The idea behind Shanghai Action Education and Bohai Leasing Co 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.