Correlation Between Ametek and Shanghai Electric

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

Diversification Opportunities for Ametek and Shanghai Electric

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ametek and Shanghai is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Shanghai Electric Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Electric and Ametek 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 Ametek Inc are associated (or correlated) with Shanghai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Electric has no effect on the direction of Ametek i.e., Ametek and Shanghai Electric go up and down completely randomly.

Pair Corralation between Ametek and Shanghai Electric

Considering the 90-day investment horizon Ametek is expected to generate 1.22 times less return on investment than Shanghai Electric. But when comparing it to its historical volatility, Ametek Inc is 6.46 times less risky than Shanghai Electric. It trades about 0.35 of its potential returns per unit of risk. Shanghai Electric Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  733.00  in Shanghai Electric Group on August 28, 2024 and sell it today you would earn a total of  30.00  from holding Shanghai Electric Group or generate 4.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ametek Inc  vs.  Shanghai Electric Group

 Performance 
       Timeline  
Ametek Inc 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Ametek exhibited solid returns over the last few months and may actually be approaching a breakup point.
Shanghai Electric 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Electric Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Shanghai Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Ametek and Shanghai Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ametek and Shanghai Electric

The main advantage of trading using opposite Ametek and Shanghai Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek position performs unexpectedly, Shanghai Electric 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 Electric will offset losses from the drop in Shanghai Electric's long position.
The idea behind Ametek Inc and Shanghai Electric Group 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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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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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