Correlation Between Bangyan Technology and Shanghai Yanpu

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

By analyzing existing cross correlation between Bangyan Technology Co and Shanghai Yanpu Metal, you can compare the effects of market volatilities on Bangyan Technology and Shanghai Yanpu 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 Bangyan Technology with a short position of Shanghai Yanpu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bangyan Technology and Shanghai Yanpu.

Diversification Opportunities for Bangyan Technology and Shanghai Yanpu

0.79

Correlation Coefficient

Bangyan Technology  Shanghai Yanpu

Poor diversification

The 3 months correlation between Bangyan and Shanghai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bangyan Technology Co and Shanghai Yanpu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yanpu Metal and Bangyan Technology 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 Bangyan Technology Co are associated (or correlated) with Shanghai Yanpu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yanpu Metal has no effect on the direction of Bangyan Technology i.e., Bangyan Technology and Shanghai Yanpu go up and down completely randomly.

Pair Corralation between Bangyan Technology and Shanghai Yanpu

Assuming the 90 days trading horizon Bangyan Technology is expected to generate 1.39 times less return on investment than Shanghai Yanpu. In addition to that, Bangyan Technology is 1.14 times more volatile than Shanghai Yanpu Metal. It trades about 0.05 of its total potential returns per unit of risk. Shanghai Yanpu Metal is currently generating about 0.07 per unit of volatility. If you would invest  3,730  in Shanghai Yanpu Metal on December 26, 2024 and sell it today you would earn a total of  357.00  from holding Shanghai Yanpu Metal or generate 9.57% return on investment over 90 days.

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

Bangyan Technology Co  vs.  Shanghai Yanpu Metal

Bangyan Technology

Risk-Adjusted Performance

Insignificant

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

Shanghai Yanpu Metal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yanpu Metal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Yanpu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bangyan Technology and Shanghai Yanpu

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

The idea behind Bangyan Technology Co and Shanghai Yanpu Metal 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.