Correlation Between SMC Corp and Shanghai Electric
Can any of the company-specific risk be diversified away by investing in both SMC Corp 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 SMC Corp and Shanghai Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and Shanghai Electric Group, you can compare the effects of market volatilities on SMC Corp 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 SMC Corp with a short position of Shanghai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Shanghai Electric.
Diversification Opportunities for SMC Corp and Shanghai Electric
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMC and Shanghai is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Shanghai Electric Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Electric and SMC Corp 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 SMC Corp Japan 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 SMC Corp i.e., SMC Corp and Shanghai Electric go up and down completely randomly.
Pair Corralation between SMC Corp and Shanghai Electric
Assuming the 90 days horizon SMC Corp Japan is expected to under-perform the Shanghai Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, SMC Corp Japan is 2.12 times less risky than Shanghai Electric. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Shanghai Electric Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 763.00 in Shanghai Electric Group on November 27, 2024 and sell it today you would lose (82.00) from holding Shanghai Electric Group or give up 10.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.06% |
| Values | Daily Returns |
SMC Corp Japan vs. Shanghai Electric Group
Performance |
| Timeline |
| SMC Corp Japan |
| Shanghai Electric |
SMC Corp and Shanghai Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMC Corp and Shanghai Electric
The main advantage of trading using opposite SMC Corp and Shanghai Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp 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.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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