Correlation Between Shanghai Action and Iat Automobile

Can any of the company-specific risk be diversified away by investing in both Shanghai Action and Iat Automobile 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 Iat Automobile 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 Iat Automobile Technology, you can compare the effects of market volatilities on Shanghai Action and Iat Automobile 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 Iat Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Action and Iat Automobile.

Diversification Opportunities for Shanghai Action and Iat Automobile

-0.27

Correlation Coefficient

Shanghai Action  Iat Automobile

Very good diversification

The 3 months correlation between Shanghai and Iat is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Iat Automobile Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iat Automobile Technology 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 Iat Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iat Automobile Technology has no effect on the direction of Shanghai Action i.e., Shanghai Action and Iat Automobile go up and down completely randomly.

Pair Corralation between Shanghai Action and Iat Automobile

Assuming the 90 days trading horizon Shanghai Action Education is expected to generate 0.76 times more return on investment than Iat Automobile. However, Shanghai Action Education is 1.32 times less risky than Iat Automobile. It trades about -0.04 of its potential returns per unit of risk. Iat Automobile Technology is currently generating about -0.17 per unit of risk. If you would invest  3,617  in Shanghai Action Education on October 2, 2024 and sell it today you would lose (93.00) from holding Shanghai Action Education or give up 2.57% of portfolio value over 90 days.

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

Shanghai Action Education  vs.  Iat Automobile Technology

Shanghai Action Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Action Education 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.

Iat Automobile Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iat Automobile Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iat Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Action and Iat Automobile

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

The idea behind Shanghai Action Education and Iat Automobile Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.