Correlation Between Shandong Gold and Sanxiang Advanced
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By analyzing existing cross correlation between Shandong Gold Mining and Sanxiang Advanced Materials, you can compare the effects of market volatilities on Shandong Gold and Sanxiang Advanced 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 Gold with a short position of Sanxiang Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and Sanxiang Advanced.
Diversification Opportunities for Shandong Gold and Sanxiang Advanced
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shandong and Sanxiang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Sanxiang Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanxiang Advanced and Shandong Gold 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 Gold Mining are associated (or correlated) with Sanxiang Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanxiang Advanced has no effect on the direction of Shandong Gold i.e., Shandong Gold and Sanxiang Advanced go up and down completely randomly.
Pair Corralation between Shandong Gold and Sanxiang Advanced
Assuming the 90 days trading horizon Shandong Gold is expected to generate 2.44 times less return on investment than Sanxiang Advanced. But when comparing it to its historical volatility, Shandong Gold Mining is 1.67 times less risky than Sanxiang Advanced. It trades about 0.05 of its potential returns per unit of risk. Sanxiang Advanced Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,659 in Sanxiang Advanced Materials on November 7, 2024 and sell it today you would earn a total of 48.00 from holding Sanxiang Advanced Materials or generate 2.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shandong Gold Mining vs. Sanxiang Advanced Materials
Performance |
| Timeline |
| Shandong Gold Mining |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Sanxiang Advanced |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shandong Gold and Sanxiang Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shandong Gold and Sanxiang Advanced
The main advantage of trading using opposite Shandong Gold and Sanxiang Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Gold position performs unexpectedly, Sanxiang Advanced 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 Sanxiang Advanced will offset losses from the drop in Sanxiang Advanced's long position.The idea behind Shandong Gold Mining and Sanxiang Advanced Materials 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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