Correlation Between Shanghai Commercial and Li Peng
Can any of the company-specific risk be diversified away by investing in both Shanghai Commercial and Li Peng 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 Shanghai Commercial and Li Peng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Commercial Savings and Li Peng Enterprise, you can compare the effects of market volatilities on Shanghai Commercial and Li Peng 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 Shanghai Commercial with a short position of Li Peng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Commercial and Li Peng.
Diversification Opportunities for Shanghai Commercial and Li Peng
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shanghai and 1447 is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Li Peng Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Peng Enterprise and Shanghai Commercial 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 Shanghai Commercial Savings are associated (or correlated) with Li Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Peng Enterprise has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Li Peng go up and down completely randomly.
Pair Corralation between Shanghai Commercial and Li Peng
Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 0.62 times more return on investment than Li Peng. However, Shanghai Commercial Savings is 1.61 times less risky than Li Peng. It trades about -0.01 of its potential returns per unit of risk. Li Peng Enterprise is currently generating about -0.01 per unit of risk. If you would invest 4,410 in Shanghai Commercial Savings on November 4, 2024 and sell it today you would lose (180.00) from holding Shanghai Commercial Savings or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shanghai Commercial Savings vs. Li Peng Enterprise
Performance |
| Timeline |
| Shanghai Commercial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Li Peng Enterprise |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shanghai Commercial and Li Peng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Commercial and Li Peng
The main advantage of trading using opposite Shanghai Commercial and Li Peng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Commercial position performs unexpectedly, Li Peng 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 Li Peng will offset losses from the drop in Li Peng's long position.The idea behind Shanghai Commercial Savings and Li Peng Enterprise 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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