Correlation Between Shandong Mining and Chongqing Changan

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Shandong Mining and Chongqing Changan 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 Shandong Mining and Chongqing Changan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shandong Mining Machinery and Chongqing Changan Automobile, you can compare the effects of market volatilities on Shandong Mining and Chongqing Changan 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 Mining with a short position of Chongqing Changan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Mining and Chongqing Changan.

Diversification Opportunities for Shandong Mining and Chongqing Changan

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Shandong and Chongqing is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Chongqing Changan Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Changan and Shandong Mining 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 Mining Machinery are associated (or correlated) with Chongqing Changan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Changan has no effect on the direction of Shandong Mining i.e., Shandong Mining and Chongqing Changan go up and down completely randomly.

Pair Corralation between Shandong Mining and Chongqing Changan

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to under-perform the Chongqing Changan. In addition to that, Shandong Mining is 2.85 times more volatile than Chongqing Changan Automobile. It trades about -0.51 of its total potential returns per unit of risk. Chongqing Changan Automobile is currently generating about -0.32 per unit of volatility. If you would invest  1,407  in Chongqing Changan Automobile on October 9, 2024 and sell it today you would lose (136.00) from holding Chongqing Changan Automobile or give up 9.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Shandong Mining Machinery  vs.  Chongqing Changan Automobile

 Performance 
       Timeline  
Shandong Mining Machinery 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Mining sustained solid returns over the last few months and may actually be approaching a breakup point.
Chongqing Changan 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Changan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shandong Mining and Chongqing Changan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shandong Mining and Chongqing Changan

The main advantage of trading using opposite Shandong Mining and Chongqing Changan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Mining position performs unexpectedly, Chongqing Changan 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 Chongqing Changan will offset losses from the drop in Chongqing Changan's long position.
The idea behind Shandong Mining Machinery and Chongqing Changan Automobile 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

Other Complementary Tools

Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Stocks Directory
Find actively traded stocks across global markets