Correlation Between Shanghai Action and Heilongjiang Publishing

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

Diversification Opportunities for Shanghai Action and Heilongjiang Publishing

-0.39

Correlation Coefficient

Shanghai Action  Heilongjiang Publishing

Very good diversification

The 3 months correlation between Shanghai and Heilongjiang is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Heilongjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Publishing 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 Heilongjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Publishing has no effect on the direction of Shanghai Action i.e., Shanghai Action and Heilongjiang Publishing go up and down completely randomly.

Pair Corralation between Shanghai Action and Heilongjiang Publishing

Assuming the 90 days trading horizon Shanghai Action Education is expected to generate 0.67 times more return on investment than Heilongjiang Publishing. However, Shanghai Action Education is 1.49 times less risky than Heilongjiang Publishing. It trades about 0.04 of its potential returns per unit of risk. Heilongjiang Publishing Media is currently generating about -0.31 per unit of risk. If you would invest  3,616  in Shanghai Action Education on October 9, 2024 and sell it today you would earn a total of  54.00  from holding Shanghai Action Education or generate 1.49% return on investment over 90 days.

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

Shanghai Action Education  vs.  Heilongjiang Publishing Media

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 somewhat strong basic indicators, Shanghai Action is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Heilongjiang Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heilongjiang Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Heilongjiang Publishing 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 Heilongjiang Publishing

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

The idea behind Shanghai Action Education and Heilongjiang Publishing Media 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 Stocks Directory module to find actively traded stocks across global markets.