Correlation Between Eastern Communications and Shaanxi Construction
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By analyzing existing cross correlation between Eastern Communications Co and Shaanxi Construction Machinery, you can compare the effects of market volatilities on Eastern Communications and Shaanxi Construction 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 Eastern Communications with a short position of Shaanxi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Communications and Shaanxi Construction.
Diversification Opportunities for Eastern Communications and Shaanxi Construction
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Shaanxi is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Communications Co and Shaanxi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Construction and Eastern Communications 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 Eastern Communications Co are associated (or correlated) with Shaanxi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Construction has no effect on the direction of Eastern Communications i.e., Eastern Communications and Shaanxi Construction go up and down completely randomly.
Pair Corralation between Eastern Communications and Shaanxi Construction
Assuming the 90 days trading horizon Eastern Communications Co is expected to generate 0.59 times more return on investment than Shaanxi Construction. However, Eastern Communications Co is 1.68 times less risky than Shaanxi Construction. It trades about -0.03 of its potential returns per unit of risk. Shaanxi Construction Machinery is currently generating about -0.09 per unit of risk. If you would invest 42.00 in Eastern Communications Co on November 6, 2024 and sell it today you would lose (2.00) from holding Eastern Communications Co or give up 4.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Communications Co vs. Shaanxi Construction Machinery
Performance |
| Timeline |
| Eastern Communications |
| Shaanxi Construction |
Eastern Communications and Shaanxi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Communications and Shaanxi Construction
The main advantage of trading using opposite Eastern Communications and Shaanxi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Communications position performs unexpectedly, Shaanxi Construction 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 Shaanxi Construction will offset losses from the drop in Shaanxi Construction's long position.The idea behind Eastern Communications Co and Shaanxi Construction Machinery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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