Correlation Between Shenyang Chemical and Fujian Nanwang

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

Diversification Opportunities for Shenyang Chemical and Fujian Nanwang

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Shenyang and Fujian is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Fujian Nanwang Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Nanwang Envir and Shenyang Chemical 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 Shenyang Chemical Industry are associated (or correlated) with Fujian Nanwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Nanwang Envir has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Fujian Nanwang go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Fujian Nanwang

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 0.99 times more return on investment than Fujian Nanwang. However, Shenyang Chemical Industry is 1.01 times less risky than Fujian Nanwang. It trades about -0.02 of its potential returns per unit of risk. Fujian Nanwang Environment is currently generating about -0.04 per unit of risk. If you would invest  505.00  in Shenyang Chemical Industry on October 21, 2024 and sell it today you would lose (174.00) from holding Shenyang Chemical Industry or give up 34.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy81.16%
ValuesDaily Returns

Shenyang Chemical Industry  vs.  Fujian Nanwang Environment

 Performance 
       Timeline  
Shenyang Chemical 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.
Fujian Nanwang Envir 

Risk-Adjusted Performance

4 of 100

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

Shenyang Chemical and Fujian Nanwang Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenyang Chemical and Fujian Nanwang

The main advantage of trading using opposite Shenyang Chemical and Fujian Nanwang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenyang Chemical position performs unexpectedly, Fujian Nanwang 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 Fujian Nanwang will offset losses from the drop in Fujian Nanwang's long position.
The idea behind Shenyang Chemical Industry and Fujian Nanwang Environment 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 Stocks Directory module to find actively traded stocks across global markets.

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