Correlation Between Shanghai CEO and China Railway

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

By analyzing existing cross correlation between Shanghai CEO Environmental and China Railway Materials, you can compare the effects of market volatilities on Shanghai CEO and China Railway 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 CEO with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai CEO and China Railway.

Diversification Opportunities for Shanghai CEO and China Railway

0.54

Correlation Coefficient

Shanghai CEO  China Railway

Very weak diversification

The 3 months correlation between Shanghai and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and China Railway Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Materials and Shanghai CEO 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 CEO Environmental are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Materials has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and China Railway go up and down completely randomly.

Pair Corralation between Shanghai CEO and China Railway

Assuming the 90 days trading horizon Shanghai CEO Environmental is expected to generate 1.43 times more return on investment than China Railway. However, Shanghai CEO is 1.43 times more volatile than China Railway Materials. It trades about 0.09 of its potential returns per unit of risk. China Railway Materials is currently generating about -0.03 per unit of risk. If you would invest  870.00  in Shanghai CEO Environmental on December 26, 2024 and sell it today you would earn a total of  75.00  from holding Shanghai CEO Environmental or generate 8.62% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  China Railway Materials

Shanghai CEO Environ

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Railway Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai CEO and China Railway

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

The idea behind Shanghai CEO Environmental and China Railway Materials 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.