Correlation Between Shenzhen MYS and Tianshan Aluminum

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

Diversification Opportunities for Shenzhen MYS and Tianshan Aluminum

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Shenzhen and Tianshan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and Tianshan Aluminum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshan Aluminum and Shenzhen MYS 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 Shenzhen MYS Environmental are associated (or correlated) with Tianshan Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshan Aluminum has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and Tianshan Aluminum go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Tianshan Aluminum

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to generate 1.67 times more return on investment than Tianshan Aluminum. However, Shenzhen MYS is 1.67 times more volatile than Tianshan Aluminum Group. It trades about 0.22 of its potential returns per unit of risk. Tianshan Aluminum Group is currently generating about -0.02 per unit of risk. If you would invest  312.00  in Shenzhen MYS Environmental on August 30, 2024 and sell it today you would earn a total of  63.00  from holding Shenzhen MYS Environmental or generate 20.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Shenzhen MYS Environmental  vs.  Tianshan Aluminum Group

 Performance 
       Timeline  
Shenzhen MYS Environ 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS sustained solid returns over the last few months and may actually be approaching a breakup point.
Tianshan Aluminum 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Tianshan Aluminum Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshan Aluminum sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen MYS and Tianshan Aluminum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen MYS and Tianshan Aluminum

The main advantage of trading using opposite Shenzhen MYS and Tianshan Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen MYS position performs unexpectedly, Tianshan Aluminum 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 Tianshan Aluminum will offset losses from the drop in Tianshan Aluminum's long position.
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The idea behind Shenzhen MYS Environmental and Tianshan Aluminum 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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