Correlation Between Shandong Longquan and Jiaozuo Wanfang
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By analyzing existing cross correlation between Shandong Longquan Pipeline and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on Shandong Longquan and Jiaozuo Wanfang 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 Longquan with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Longquan and Jiaozuo Wanfang.
Diversification Opportunities for Shandong Longquan and Jiaozuo Wanfang
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Shandong and Jiaozuo is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Shandong Longquan 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 Longquan Pipeline are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and Jiaozuo Wanfang go up and down completely randomly.
Pair Corralation between Shandong Longquan and Jiaozuo Wanfang
Assuming the 90 days trading horizon Shandong Longquan Pipeline is expected to generate 0.71 times more return on investment than Jiaozuo Wanfang. However, Shandong Longquan Pipeline is 1.4 times less risky than Jiaozuo Wanfang. It trades about 0.44 of its potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.09 per unit of risk. If you would invest 430.00 in Shandong Longquan Pipeline on November 5, 2024 and sell it today you would earn a total of 44.00 from holding Shandong Longquan Pipeline or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shandong Longquan Pipeline vs. Jiaozuo Wanfang Aluminum
Performance |
| Timeline |
| Shandong Longquan |
| Jiaozuo Wanfang Aluminum |
Shandong Longquan and Jiaozuo Wanfang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shandong Longquan and Jiaozuo Wanfang
The main advantage of trading using opposite Shandong Longquan and Jiaozuo Wanfang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Longquan position performs unexpectedly, Jiaozuo Wanfang 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 Jiaozuo Wanfang will offset losses from the drop in Jiaozuo Wanfang's long position.The idea behind Shandong Longquan Pipeline and Jiaozuo Wanfang Aluminum 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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