Correlation Between Shanghai Action and Biwin Storage

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

Diversification Opportunities for Shanghai Action and Biwin Storage

0.34

Correlation Coefficient

Shanghai Action  Biwin Storage

Weak diversification

The 3 months correlation between Shanghai and Biwin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage 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 Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Shanghai Action i.e., Shanghai Action and Biwin Storage go up and down completely randomly.

Pair Corralation between Shanghai Action and Biwin Storage

Assuming the 90 days trading horizon Shanghai Action Education is expected to generate 0.74 times more return on investment than Biwin Storage. However, Shanghai Action Education is 1.34 times less risky than Biwin Storage. It trades about 0.03 of its potential returns per unit of risk. Biwin Storage Technology is currently generating about -0.03 per unit of risk. If you would invest  3,485  in Shanghai Action Education on October 7, 2024 and sell it today you would earn a total of  73.00  from holding Shanghai Action Education or generate 2.09% return on investment over 90 days.

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

Shanghai Action Education  vs.  Biwin Storage 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biwin Storage Technology 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 Shanghai Action and Biwin Storage

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

The idea behind Shanghai Action Education and Biwin Storage 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.