Correlation Between Shanghai Electric and Nordson
Can any of the company-specific risk be diversified away by investing in both Shanghai Electric and Nordson 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 Shanghai Electric and Nordson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Electric Group and Nordson, you can compare the effects of market volatilities on Shanghai Electric and Nordson 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 Electric with a short position of Nordson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Electric and Nordson.
Diversification Opportunities for Shanghai Electric and Nordson
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shanghai and Nordson is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Electric Group and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson and Shanghai Electric 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 Electric Group are associated (or correlated) with Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Shanghai Electric i.e., Shanghai Electric and Nordson go up and down completely randomly.
Pair Corralation between Shanghai Electric and Nordson
Assuming the 90 days horizon Shanghai Electric Group is expected to generate 9.48 times more return on investment than Nordson. However, Shanghai Electric is 9.48 times more volatile than Nordson. It trades about 0.09 of its potential returns per unit of risk. Nordson is currently generating about 0.11 per unit of risk. If you would invest 687.00 in Shanghai Electric Group on August 31, 2024 and sell it today you would earn a total of 76.00 from holding Shanghai Electric Group or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shanghai Electric Group vs. Nordson
Performance |
| Timeline |
| Shanghai Electric |
| Nordson |
Shanghai Electric and Nordson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Electric and Nordson
The main advantage of trading using opposite Shanghai Electric and Nordson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Electric position performs unexpectedly, Nordson 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 Nordson will offset losses from the drop in Nordson's long position.| Shanghai Electric vs. Xinjiang Goldwind Science | Shanghai Electric vs. American Superconductor | Shanghai Electric vs. Cummins |
| Nordson vs. Illinois Tool Works | Nordson vs. Pentair PLC | Nordson vs. Parker Hannifin | Nordson vs. Emerson Electric |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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