Correlation Between Shanghai and Gotion High

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

By analyzing existing cross correlation between Shanghai SK Automation and Gotion High tech, you can compare the effects of market volatilities on Shanghai and Gotion High 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 Shanghai with a short position of Gotion High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai and Gotion High.

Diversification Opportunities for Shanghai and Gotion High

0.88

Correlation Coefficient

Shanghai  Gotion High

Very poor diversification

The 3 months correlation between Shanghai and Gotion is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai SK Automation and Gotion High tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotion High tech and Shanghai 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 Shanghai SK Automation are associated (or correlated) with Gotion High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotion High tech has no effect on the direction of Shanghai i.e., Shanghai and Gotion High go up and down completely randomly.

Pair Corralation between Shanghai and Gotion High

Assuming the 90 days trading horizon Shanghai SK Automation is expected to generate 1.31 times more return on investment than Gotion High. However, Shanghai is 1.31 times more volatile than Gotion High tech. It trades about -0.07 of its potential returns per unit of risk. Gotion High tech is currently generating about -0.15 per unit of risk. If you would invest  4,032  in Shanghai SK Automation on October 6, 2024 and sell it today you would lose (461.00) from holding Shanghai SK Automation or give up 11.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

Shanghai SK Automation  vs.  Gotion High tech

Shanghai SK Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai SK Automation 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.

Gotion High tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotion High tech 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.

Pair Trading with Shanghai and Gotion High

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

The idea behind Shanghai SK Automation and Gotion High tech 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..