Correlation Between Heilongjiang Publishing and Shandong Publishing

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

By analyzing existing cross correlation between Heilongjiang Publishing Media and Shandong Publishing Media, you can compare the effects of market volatilities on Heilongjiang Publishing and Shandong 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 Heilongjiang Publishing with a short position of Shandong Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heilongjiang Publishing and Shandong Publishing.

Diversification Opportunities for Heilongjiang Publishing and Shandong Publishing

0.42

Correlation Coefficient

Heilongjiang Publishing  Shandong Publishing

Very weak diversification

The 3 months correlation between Heilongjiang and Shandong is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Publishing Media and Shandong Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Publishing Media and Heilongjiang Publishing 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 Heilongjiang Publishing Media are associated (or correlated) with Shandong Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Publishing Media has no effect on the direction of Heilongjiang Publishing i.e., Heilongjiang Publishing and Shandong Publishing go up and down completely randomly.

Pair Corralation between Heilongjiang Publishing and Shandong Publishing

Assuming the 90 days trading horizon Heilongjiang Publishing Media is expected to under-perform the Shandong Publishing. In addition to that, Heilongjiang Publishing is 1.13 times more volatile than Shandong Publishing Media. It trades about -0.18 of its total potential returns per unit of risk. Shandong Publishing Media is currently generating about -0.03 per unit of volatility. If you would invest  1,070  in Shandong Publishing Media on December 2, 2024 and sell it today you would lose (60.00) from holding Shandong Publishing Media or give up 5.61% of portfolio value over 90 days.

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

Heilongjiang Publishing Media  vs.  Shandong Publishing Media

Heilongjiang Publishing

Risk-Adjusted Performance

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 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.

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Heilongjiang Publishing Media and Shandong 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.