Correlation Between Sinosteel Luonai and Shaanxi Meineng

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

By analyzing existing cross correlation between Sinosteel Luonai Materials and Shaanxi Meineng Clean, you can compare the effects of market volatilities on Sinosteel Luonai and Shaanxi Meineng 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 Sinosteel Luonai with a short position of Shaanxi Meineng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Luonai and Shaanxi Meineng.

Diversification Opportunities for Sinosteel Luonai and Shaanxi Meineng

0.95

Correlation Coefficient

Sinosteel Luonai  Shaanxi Meineng

Almost no diversification

The 3 months correlation between Sinosteel and Shaanxi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Luonai Materials and Shaanxi Meineng Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Meineng Clean and Sinosteel Luonai 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 Sinosteel Luonai Materials are associated (or correlated) with Shaanxi Meineng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Meineng Clean has no effect on the direction of Sinosteel Luonai i.e., Sinosteel Luonai and Shaanxi Meineng go up and down completely randomly.

Pair Corralation between Sinosteel Luonai and Shaanxi Meineng

Assuming the 90 days trading horizon Sinosteel Luonai Materials is expected to under-perform the Shaanxi Meineng. But the stock apears to be less risky and, when comparing its historical volatility, Sinosteel Luonai Materials is 1.28 times less risky than Shaanxi Meineng. The stock trades about -0.02 of its potential returns per unit of risk. The Shaanxi Meineng Clean is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,002  in Shaanxi Meineng Clean on September 22, 2024 and sell it today you would lose (694.00) from holding Shaanxi Meineng Clean or give up 34.67% of portfolio value over 90 days.

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

Sinosteel Luonai Materials  vs.  Shaanxi Meineng Clean

Sinosteel Luonai Mat

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Luonai Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Luonai sustained solid returns over the last few months and may actually be approaching a breakup point.

Shaanxi Meineng Clean

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Meineng Clean are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Meineng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinosteel Luonai and Shaanxi Meineng

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

The idea behind Sinosteel Luonai Materials and Shaanxi Meineng Clean 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.