Correlation Between Agricultural Bank and Shanghai CEO

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Can any of the company-specific risk be diversified away by investing in both Agricultural Bank and Shanghai CEO 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 Agricultural Bank and Shanghai CEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agricultural Bank of and Shanghai CEO Environmental, you can compare the effects of market volatilities on Agricultural Bank and Shanghai CEO 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 Agricultural Bank with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agricultural Bank and Shanghai CEO.

Diversification Opportunities for Agricultural Bank and Shanghai CEO

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Agricultural and Shanghai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and Agricultural Bank 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 Agricultural Bank of are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Agricultural Bank i.e., Agricultural Bank and Shanghai CEO go up and down completely randomly.

Pair Corralation between Agricultural Bank and Shanghai CEO

Assuming the 90 days trading horizon Agricultural Bank of is expected to generate 0.4 times more return on investment than Shanghai CEO. However, Agricultural Bank of is 2.48 times less risky than Shanghai CEO. It trades about 0.37 of its potential returns per unit of risk. Shanghai CEO Environmental is currently generating about 0.02 per unit of risk. If you would invest  469.00  in Agricultural Bank of on September 12, 2024 and sell it today you would earn a total of  36.00  from holding Agricultural Bank of or generate 7.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Agricultural Bank of  vs.  Shanghai CEO Environmental

 Performance 
       Timeline  
Agricultural Bank 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agricultural Bank sustained solid returns over the last few months and may actually be approaching a breakup point.
Shanghai CEO Environ 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai CEO Environmental are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai CEO sustained solid returns over the last few months and may actually be approaching a breakup point.

Agricultural Bank and Shanghai CEO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agricultural Bank and Shanghai CEO

The main advantage of trading using opposite Agricultural Bank and Shanghai CEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agricultural Bank position performs unexpectedly, Shanghai CEO 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 Shanghai CEO will offset losses from the drop in Shanghai CEO's long position.
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The idea behind Agricultural Bank of and Shanghai CEO Environmental 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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