Correlation Between Trina Solar and Shanghai Broadband

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

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

Diversification Opportunities for Trina Solar and Shanghai Broadband

0.81

Correlation Coefficient

Trina Solar  Shanghai Broadband

Very poor diversification

The 3 months correlation between Trina and Shanghai is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Trina Solar Co and Shanghai Broadband Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Broadband and Trina Solar 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 Trina Solar Co are associated (or correlated) with Shanghai Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Broadband has no effect on the direction of Trina Solar i.e., Trina Solar and Shanghai Broadband go up and down completely randomly.

Pair Corralation between Trina Solar and Shanghai Broadband

Assuming the 90 days trading horizon Trina Solar Co is expected to under-perform the Shanghai Broadband. But the stock apears to be less risky and, when comparing its historical volatility, Trina Solar Co is 1.53 times less risky than Shanghai Broadband. The stock trades about -0.23 of its potential returns per unit of risk. The Shanghai Broadband Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Shanghai Broadband Technology on December 11, 2024 and sell it today you would lose (29.00) from holding Shanghai Broadband Technology or give up 7.53% of portfolio value over 90 days.

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

Trina Solar Co  vs.  Shanghai Broadband Technology

Trina Solar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trina Solar Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shanghai Broadband

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Trina Solar and Shanghai Broadband

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

The idea behind Trina Solar Co and Shanghai Broadband 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.