Correlation Between Piotech and Shaanxi Construction

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

By analyzing existing cross correlation between Piotech Inc A and Shaanxi Construction Machinery, you can compare the effects of market volatilities on Piotech and Shaanxi Construction 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 Piotech with a short position of Shaanxi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and Shaanxi Construction.

Diversification Opportunities for Piotech and Shaanxi Construction

0.63

Correlation Coefficient

Piotech  Shaanxi Construction

Poor diversification

The 3 months correlation between Piotech and Shaanxi is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and Shaanxi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Construction and Piotech 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 Piotech Inc A are associated (or correlated) with Shaanxi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Construction has no effect on the direction of Piotech i.e., Piotech and Shaanxi Construction go up and down completely randomly.

Pair Corralation between Piotech and Shaanxi Construction

Assuming the 90 days trading horizon Piotech Inc A is expected to under-perform the Shaanxi Construction. In addition to that, Piotech is 1.11 times more volatile than Shaanxi Construction Machinery. It trades about -0.02 of its total potential returns per unit of risk. Shaanxi Construction Machinery is currently generating about -0.01 per unit of volatility. If you would invest  423.00  in Shaanxi Construction Machinery on October 5, 2024 and sell it today you would lose (113.00) from holding Shaanxi Construction Machinery or give up 26.71% of portfolio value over 90 days.

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

Piotech Inc A  vs.  Shaanxi Construction Machinery

Piotech Inc A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Piotech Inc A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shaanxi Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Construction Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Piotech and Shaanxi Construction

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

The idea behind Piotech Inc A and Shaanxi Construction Machinery 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.