Correlation Between Shanghai Commercial and TSRC Corp
Can any of the company-specific risk be diversified away by investing in both Shanghai Commercial and TSRC Corp 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 TSRC Corp 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 TSRC Corp, you can compare the effects of market volatilities on Shanghai Commercial and TSRC Corp 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 TSRC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Commercial and TSRC Corp.
Diversification Opportunities for Shanghai Commercial and TSRC Corp
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shanghai and TSRC is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and TSRC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSRC Corp 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 TSRC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSRC Corp has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and TSRC Corp go up and down completely randomly.
Pair Corralation between Shanghai Commercial and TSRC Corp
Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 1.08 times more return on investment than TSRC Corp. However, Shanghai Commercial is 1.08 times more volatile than TSRC Corp. It trades about 0.38 of its potential returns per unit of risk. TSRC Corp is currently generating about 0.23 per unit of risk. If you would invest 4,050 in Shanghai Commercial Savings on November 8, 2024 and sell it today you would earn a total of 335.00 from holding Shanghai Commercial Savings or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shanghai Commercial Savings vs. TSRC Corp
Performance |
| Timeline |
| Shanghai Commercial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| TSRC Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shanghai Commercial and TSRC Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Commercial and TSRC Corp
The main advantage of trading using opposite Shanghai Commercial and TSRC Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Commercial position performs unexpectedly, TSRC Corp 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 TSRC Corp will offset losses from the drop in TSRC Corp's long position.The idea behind Shanghai Commercial Savings and TSRC Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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