Correlation Between Shandong Hongchuang and Zhejiang Construction
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By analyzing existing cross correlation between Shandong Hongchuang Aluminum and Zhejiang Construction Investment, you can compare the effects of market volatilities on Shandong Hongchuang and Zhejiang Construction 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 Shandong Hongchuang with a short position of Zhejiang Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Hongchuang and Zhejiang Construction.
Diversification Opportunities for Shandong Hongchuang and Zhejiang Construction
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shandong and Zhejiang is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hongchuang Aluminum and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction and Shandong Hongchuang 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 Shandong Hongchuang Aluminum are associated (or correlated) with Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of Shandong Hongchuang i.e., Shandong Hongchuang and Zhejiang Construction go up and down completely randomly.
Pair Corralation between Shandong Hongchuang and Zhejiang Construction
Assuming the 90 days trading horizon Shandong Hongchuang Aluminum is expected to generate 2.31 times more return on investment than Zhejiang Construction. However, Shandong Hongchuang is 2.31 times more volatile than Zhejiang Construction Investment. It trades about 0.25 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about -0.57 per unit of risk. If you would invest 807.00 in Shandong Hongchuang Aluminum on October 16, 2024 and sell it today you would earn a total of 180.00 from holding Shandong Hongchuang Aluminum or generate 22.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Shandong Hongchuang Aluminum vs. Zhejiang Construction Investme
Performance |
| Timeline |
| Shandong Hongchuang |
| Zhejiang Construction |
Shandong Hongchuang and Zhejiang Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shandong Hongchuang and Zhejiang Construction
The main advantage of trading using opposite Shandong Hongchuang and Zhejiang Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Hongchuang position performs unexpectedly, Zhejiang Construction 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 Zhejiang Construction will offset losses from the drop in Zhejiang Construction's long position.The idea behind Shandong Hongchuang Aluminum and Zhejiang Construction Investment 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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