Correlation Between Shanghai Rongtai and Liaoning Chengda
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By analyzing existing cross correlation between Shanghai Rongtai Health and Liaoning Chengda Biotechnology, you can compare the effects of market volatilities on Shanghai Rongtai and Liaoning Chengda 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 Rongtai with a short position of Liaoning Chengda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Rongtai and Liaoning Chengda.
Diversification Opportunities for Shanghai Rongtai and Liaoning Chengda
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shanghai and Liaoning is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Rongtai Health and Liaoning Chengda Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Chengda Bio and Shanghai Rongtai 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 Rongtai Health are associated (or correlated) with Liaoning Chengda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Chengda Bio has no effect on the direction of Shanghai Rongtai i.e., Shanghai Rongtai and Liaoning Chengda go up and down completely randomly.
Pair Corralation between Shanghai Rongtai and Liaoning Chengda
Assuming the 90 days trading horizon Shanghai Rongtai Health is expected to under-perform the Liaoning Chengda. In addition to that, Shanghai Rongtai is 1.51 times more volatile than Liaoning Chengda Biotechnology. It trades about -0.03 of its total potential returns per unit of risk. Liaoning Chengda Biotechnology is currently generating about -0.02 per unit of volatility. If you would invest 3,150 in Liaoning Chengda Biotechnology on November 9, 2024 and sell it today you would lose (526.00) from holding Liaoning Chengda Biotechnology or give up 16.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shanghai Rongtai Health vs. Liaoning Chengda Biotechnology
Performance |
| Timeline |
| Shanghai Rongtai Health |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Liaoning Chengda Bio |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Shanghai Rongtai and Liaoning Chengda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Rongtai and Liaoning Chengda
The main advantage of trading using opposite Shanghai Rongtai and Liaoning Chengda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Rongtai position performs unexpectedly, Liaoning Chengda 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 Liaoning Chengda will offset losses from the drop in Liaoning Chengda's long position.The idea behind Shanghai Rongtai Health and Liaoning Chengda Biotechnology 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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