Correlation Between Goodwill E and Shanghai Shuixing

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

By analyzing existing cross correlation between Goodwill E Health and Shanghai Shuixing Home, you can compare the effects of market volatilities on Goodwill E and Shanghai Shuixing 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 Goodwill E with a short position of Shanghai Shuixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodwill E and Shanghai Shuixing.

Diversification Opportunities for Goodwill E and Shanghai Shuixing

-0.34

Correlation Coefficient

Goodwill E  Shanghai Shuixing

Very good diversification

The 3 months correlation between Goodwill and Shanghai is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Goodwill E Health and Shanghai Shuixing Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shuixing Home and Goodwill E 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 Goodwill E Health are associated (or correlated) with Shanghai Shuixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shuixing Home has no effect on the direction of Goodwill E i.e., Goodwill E and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Goodwill E and Shanghai Shuixing

Assuming the 90 days trading horizon Goodwill E Health is expected to under-perform the Shanghai Shuixing. In addition to that, Goodwill E is 1.24 times more volatile than Shanghai Shuixing Home. It trades about -0.07 of its total potential returns per unit of risk. Shanghai Shuixing Home is currently generating about 0.05 per unit of volatility. If you would invest  1,385  in Shanghai Shuixing Home on October 25, 2024 and sell it today you would earn a total of  114.00  from holding Shanghai Shuixing Home or generate 8.23% return on investment over 90 days.

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

Goodwill E Health  vs.  Shanghai Shuixing Home

Goodwill E Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodwill E Health 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 Shuixing Home

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Shuixing Home are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Shuixing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Goodwill E and Shanghai Shuixing

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

The idea behind Goodwill E Health and Shanghai Shuixing Home 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.