Correlation Between Xiangyu Medical and Shanghai Pudong

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

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

Diversification Opportunities for Xiangyu Medical and Shanghai Pudong

-0.58

Correlation Coefficient

Xiangyu Medical  Shanghai Pudong

Excellent diversification

The 3 months correlation between Xiangyu and Shanghai is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyu Medical Co and Shanghai Pudong Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pudong Deve and Xiangyu Medical 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 Xiangyu Medical Co are associated (or correlated) with Shanghai Pudong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pudong Deve has no effect on the direction of Xiangyu Medical i.e., Xiangyu Medical and Shanghai Pudong go up and down completely randomly.

Pair Corralation between Xiangyu Medical and Shanghai Pudong

Assuming the 90 days trading horizon Xiangyu Medical Co is expected to generate 2.65 times more return on investment than Shanghai Pudong. However, Xiangyu Medical is 2.65 times more volatile than Shanghai Pudong Development. It trades about 0.02 of its potential returns per unit of risk. Shanghai Pudong Development is currently generating about 0.03 per unit of risk. If you would invest  2,898  in Xiangyu Medical Co on October 26, 2024 and sell it today you would lose (19.00) from holding Xiangyu Medical Co or give up 0.66% of portfolio value over 90 days.

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

Xiangyu Medical Co  vs.  Shanghai Pudong Development

Xiangyu Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyu Medical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiangyu Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shanghai Pudong Deve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Pudong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xiangyu Medical and Shanghai Pudong

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

The idea behind Xiangyu Medical Co and Shanghai Pudong Development 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.