Correlation Between Shanghai Yanpu and Empyrean Technology

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Can any of the company-specific risk be diversified away by investing in both Shanghai Yanpu and Empyrean Technology 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 Yanpu and Empyrean Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Yanpu Metal and Empyrean Technology Co, you can compare the effects of market volatilities on Shanghai Yanpu and Empyrean Technology 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 Yanpu with a short position of Empyrean Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Yanpu and Empyrean Technology.

Diversification Opportunities for Shanghai Yanpu and Empyrean Technology

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Empyrean is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yanpu Metal and Empyrean Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empyrean Technology and Shanghai Yanpu 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 Yanpu Metal are associated (or correlated) with Empyrean Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empyrean Technology has no effect on the direction of Shanghai Yanpu i.e., Shanghai Yanpu and Empyrean Technology go up and down completely randomly.

Pair Corralation between Shanghai Yanpu and Empyrean Technology

Assuming the 90 days trading horizon Shanghai Yanpu Metal is expected to generate 0.48 times more return on investment than Empyrean Technology. However, Shanghai Yanpu Metal is 2.08 times less risky than Empyrean Technology. It trades about -0.19 of its potential returns per unit of risk. Empyrean Technology Co is currently generating about -0.2 per unit of risk. If you would invest  3,860  in Shanghai Yanpu Metal on October 9, 2024 and sell it today you would lose (265.00) from holding Shanghai Yanpu Metal or give up 6.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanghai Yanpu Metal  vs.  Empyrean Technology Co

 Performance 
       Timeline  
Shanghai Yanpu Metal 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Empyrean Technology Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Empyrean Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Yanpu and Empyrean Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Yanpu and Empyrean Technology

The main advantage of trading using opposite Shanghai Yanpu and Empyrean Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Yanpu position performs unexpectedly, Empyrean Technology 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 Empyrean Technology will offset losses from the drop in Empyrean Technology's long position.
The idea behind Shanghai Yanpu Metal and Empyrean Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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