Correlation Between Hangzhou Pinming and Shanghai Material

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

By analyzing existing cross correlation between Hangzhou Pinming Software and Shanghai Material Trading, you can compare the effects of market volatilities on Hangzhou Pinming and Shanghai Material 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 Hangzhou Pinming with a short position of Shanghai Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Pinming and Shanghai Material.

Diversification Opportunities for Hangzhou Pinming and Shanghai Material

0.16

Correlation Coefficient

Hangzhou Pinming  Shanghai Material

Average diversification

The 3 months correlation between Hangzhou and Shanghai is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Pinming Software and Shanghai Material Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Material Trading and Hangzhou Pinming 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 Hangzhou Pinming Software are associated (or correlated) with Shanghai Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Material Trading has no effect on the direction of Hangzhou Pinming i.e., Hangzhou Pinming and Shanghai Material go up and down completely randomly.

Pair Corralation between Hangzhou Pinming and Shanghai Material

Assuming the 90 days trading horizon Hangzhou Pinming Software is expected to under-perform the Shanghai Material. But the stock apears to be less risky and, when comparing its historical volatility, Hangzhou Pinming Software is 1.17 times less risky than Shanghai Material. The stock trades about -0.16 of its potential returns per unit of risk. The Shanghai Material Trading is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  950.00  in Shanghai Material Trading on October 7, 2024 and sell it today you would earn a total of  18.00  from holding Shanghai Material Trading or generate 1.89% return on investment over 90 days.

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

Hangzhou Pinming Software  vs.  Shanghai Material Trading

Hangzhou Pinming Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Pinming Software 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.

Shanghai Material Trading

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Material Trading are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Material may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hangzhou Pinming and Shanghai Material

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

The idea behind Hangzhou Pinming Software and Shanghai Material Trading 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.