Correlation Between Teijin and Shanghai Industrial

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

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

Diversification Opportunities for Teijin and Shanghai Industrial

0.4

Correlation Coefficient

Teijin  Shanghai Industrial

Very weak diversification

The 3 months correlation between Teijin and Shanghai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Teijin and Shanghai Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Industrial and Teijin 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 Teijin are associated (or correlated) with Shanghai Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Industrial has no effect on the direction of Teijin i.e., Teijin and Shanghai Industrial go up and down completely randomly.

Pair Corralation between Teijin and Shanghai Industrial

Assuming the 90 days horizon Teijin is expected to under-perform the Shanghai Industrial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Teijin is 1.45 times less risky than Shanghai Industrial. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Shanghai Industrial Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Shanghai Industrial Holdings on October 25, 2024 and sell it today you would lose (20.00) from holding Shanghai Industrial Holdings or give up 14.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	49.65%
Values	Daily Returns

Teijin  vs.  Shanghai Industrial Holdings

Teijin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teijin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanghai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Shanghai Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Teijin and Shanghai Industrial

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

The idea behind Teijin and Shanghai Industrial Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.