Correlation Between GOLD ROAD and Shanghai Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and Shanghai Pharmaceuticals 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 GOLD ROAD and Shanghai Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOLD ROAD RES and Shanghai Pharmaceuticals Holding, you can compare the effects of market volatilities on GOLD ROAD and Shanghai Pharmaceuticals 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 GOLD ROAD with a short position of Shanghai Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and Shanghai Pharmaceuticals.

Diversification Opportunities for GOLD ROAD and Shanghai Pharmaceuticals

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between GOLD and Shanghai is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Shanghai Pharmaceuticals Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pharmaceuticals and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with Shanghai Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pharmaceuticals has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and Shanghai Pharmaceuticals go up and down completely randomly.

Pair Corralation between GOLD ROAD and Shanghai Pharmaceuticals

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.38 times more return on investment than Shanghai Pharmaceuticals. However, GOLD ROAD is 1.38 times more volatile than Shanghai Pharmaceuticals Holding. It trades about 0.18 of its potential returns per unit of risk. Shanghai Pharmaceuticals Holding is currently generating about 0.06 per unit of risk. If you would invest  117.00  in GOLD ROAD RES on October 24, 2024 and sell it today you would earn a total of  32.00  from holding GOLD ROAD RES or generate 27.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GOLD ROAD RES  vs.  Shanghai Pharmaceuticals Holdi

 Performance 
       Timeline  
GOLD ROAD RES 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.
Shanghai Pharmaceuticals 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pharmaceuticals Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shanghai Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GOLD ROAD and Shanghai Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GOLD ROAD and Shanghai Pharmaceuticals

The main advantage of trading using opposite GOLD ROAD and Shanghai Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD position performs unexpectedly, Shanghai Pharmaceuticals 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 Pharmaceuticals will offset losses from the drop in Shanghai Pharmaceuticals' long position.
The idea behind GOLD ROAD RES and Shanghai Pharmaceuticals Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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