Correlation Between Shanghai CEO and Chongqing Shunbo

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

Diversification Opportunities for Shanghai CEO and Chongqing Shunbo

0.62

Correlation Coefficient

Shanghai CEO  Chongqing Shunbo

Poor diversification

The 3 months correlation between Shanghai and Chongqing is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum 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 Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Shanghai CEO and Chongqing Shunbo

Assuming the 90 days trading horizon Shanghai CEO Environmental is expected to generate 1.22 times more return on investment than Chongqing Shunbo. However, Shanghai CEO is 1.22 times more volatile than Chongqing Shunbo Aluminum. It trades about 0.12 of its potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about 0.06 per unit of risk. If you would invest  863.00  in Shanghai CEO Environmental on December 28, 2024 and sell it today you would earn a total of  112.00  from holding Shanghai CEO Environmental or generate 12.98% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  Chongqing Shunbo Aluminum

Shanghai CEO Environ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Shunbo 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 Chongqing Shunbo

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

The idea behind Shanghai CEO Environmental and Chongqing Shunbo Aluminum 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 Stocks Directory module to find actively traded stocks across global markets.