Correlation Between American Superconductor and Shanghai Electric

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

By analyzing existing cross correlation between American Superconductor and Shanghai Electric Group, you can compare the effects of market volatilities on American Superconductor and Shanghai Electric 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 American Superconductor with a short position of Shanghai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Superconductor and Shanghai Electric.

Diversification Opportunities for American Superconductor and Shanghai Electric

-0.26

Correlation Coefficient

American Superconductor  Shanghai Electric

Very good diversification

The 3 months correlation between American and Shanghai is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and Shanghai Electric Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Electric and American Superconductor 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 American Superconductor are associated (or correlated) with Shanghai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Electric has no effect on the direction of American Superconductor i.e., American Superconductor and Shanghai Electric go up and down completely randomly.

Pair Corralation between American Superconductor and Shanghai Electric

Given the investment horizon of 90 days American Superconductor is expected to under-perform the Shanghai Electric. In addition to that, American Superconductor is 1.85 times more volatile than Shanghai Electric Group. It trades about -0.04 of its total potential returns per unit of risk. Shanghai Electric Group is currently generating about -0.02 per unit of volatility. If you would invest  780.00  in Shanghai Electric Group on December 30, 2024 and sell it today you would lose (65.00) from holding Shanghai Electric Group or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

American Superconductor  vs.  Shanghai Electric Group

American Superconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Superconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shanghai Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Electric Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Shanghai Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Superconductor and Shanghai Electric

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

The idea behind American Superconductor and Shanghai Electric Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.