Correlation Between Shanghai and Hygon Information

Can any of the company-specific risk be diversified away by investing in both Shanghai and Hygon Information 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 Hygon Information 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 Hygon Information Technology, you can compare the effects of market volatilities on Shanghai and Hygon Information 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 Hygon Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai and Hygon Information.

Diversification Opportunities for Shanghai and Hygon Information

0.44

Correlation Coefficient

Shanghai  Hygon Information

Very weak diversification

The 3 months correlation between Shanghai and Hygon is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai SK Automation and Hygon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hygon Information 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 Hygon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hygon Information has no effect on the direction of Shanghai i.e., Shanghai and Hygon Information go up and down completely randomly.

Pair Corralation between Shanghai and Hygon Information

Assuming the 90 days trading horizon Shanghai SK Automation is expected to generate 0.78 times more return on investment than Hygon Information. However, Shanghai SK Automation is 1.28 times less risky than Hygon Information. It trades about 0.09 of its potential returns per unit of risk. Hygon Information Technology is currently generating about -0.03 per unit of risk. If you would invest  3,866  in Shanghai SK Automation on December 26, 2024 and sell it today you would earn a total of  566.00  from holding Shanghai SK Automation or generate 14.64% return on investment over 90 days.

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

Shanghai SK Automation  vs.  Hygon Information Technology

Shanghai SK Automation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai SK Automation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai sustained solid returns over the last few months and may actually be approaching a breakup point.

Hygon Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hygon Information Technology 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.

Pair Trading with Shanghai and Hygon Information

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

The idea behind Shanghai SK Automation and Hygon Information Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.