Correlation Between China High and Shanghai Electric
Can any of the company-specific risk be diversified away by investing in both China High 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 China High and Shanghai Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China High Speed and Shanghai Electric Group, you can compare the effects of market volatilities on China High 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 China High with a short position of Shanghai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of China High and Shanghai Electric.
Diversification Opportunities for China High and Shanghai Electric
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Shanghai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China High Speed and Shanghai Electric Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Electric and China High 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 China High Speed 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 China High i.e., China High and Shanghai Electric go up and down completely randomly.
Pair Corralation between China High and Shanghai Electric
Assuming the 90 days horizon China High Speed is expected to under-perform the Shanghai Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, China High Speed is 1.27 times less risky than Shanghai Electric. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Shanghai Electric Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 502.00 in Shanghai Electric Group on September 2, 2024 and sell it today you would earn a total of 208.00 from holding Shanghai Electric Group or generate 41.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China High Speed vs. Shanghai Electric Group
Performance |
| Timeline |
| China High Speed |
| Shanghai Electric |
China High and Shanghai Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China High and Shanghai Electric
The main advantage of trading using opposite China High and Shanghai Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China High 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.| China High vs. Shanghai Electric Group | China High vs. Xinjiang Goldwind Science | China High vs. Fanuc | China High vs. Rockwell Automation |
| Shanghai Electric vs. Xinjiang Goldwind Science | Shanghai Electric vs. American Superconductor | Shanghai Electric vs. Cummins |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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