Correlation Between Shanghai Fudan and Minmetals Capital

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

By analyzing existing cross correlation between Shanghai Fudan Microelectronics and Minmetals Capital Co, you can compare the effects of market volatilities on Shanghai Fudan and Minmetals Capital 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 Fudan with a short position of Minmetals Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Fudan and Minmetals Capital.

Diversification Opportunities for Shanghai Fudan and Minmetals Capital

0.7

Correlation Coefficient

Shanghai Fudan  Minmetals Capital

Poor diversification

The 3 months correlation between Shanghai and Minmetals is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Fudan Microelectronic and Minmetals Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minmetals Capital and Shanghai Fudan 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 Fudan Microelectronics are associated (or correlated) with Minmetals Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minmetals Capital has no effect on the direction of Shanghai Fudan i.e., Shanghai Fudan and Minmetals Capital go up and down completely randomly.

Pair Corralation between Shanghai Fudan and Minmetals Capital

Assuming the 90 days trading horizon Shanghai Fudan Microelectronics is expected to under-perform the Minmetals Capital. In addition to that, Shanghai Fudan is 1.45 times more volatile than Minmetals Capital Co. It trades about -0.01 of its total potential returns per unit of risk. Minmetals Capital Co is currently generating about 0.03 per unit of volatility. If you would invest  513.00  in Minmetals Capital Co on October 4, 2024 and sell it today you would earn a total of  132.00  from holding Minmetals Capital Co or generate 25.73% return on investment over 90 days.

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

Shanghai Fudan Microelectronic  vs.  Minmetals Capital Co

Shanghai Fudan Micro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Minmetals Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minmetals Capital Co 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 Fudan and Minmetals Capital

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

The idea behind Shanghai Fudan Microelectronics and Minmetals Capital Co 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.