Correlation Between Shengda Mining and Cultural Investment

Can any of the company-specific risk be diversified away by investing in both Shengda Mining and Cultural Investment 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 Shengda Mining and Cultural Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shengda Mining Co and Cultural Investment Holdings, you can compare the effects of market volatilities on Shengda Mining and Cultural Investment 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 Shengda Mining with a short position of Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengda Mining and Cultural Investment.

Diversification Opportunities for Shengda Mining and Cultural Investment

0.26

Correlation Coefficient

Shengda Mining  Cultural Investment

Modest diversification

The 3 months correlation between Shengda and Cultural is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shengda Mining Co and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment and Shengda Mining 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 Shengda Mining Co are associated (or correlated) with Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of Shengda Mining i.e., Shengda Mining and Cultural Investment go up and down completely randomly.

Pair Corralation between Shengda Mining and Cultural Investment

Assuming the 90 days trading horizon Shengda Mining Co is expected to under-perform the Cultural Investment. But the stock apears to be less risky and, when comparing its historical volatility, Shengda Mining Co is 1.31 times less risky than Cultural Investment. The stock trades about -0.02 of its potential returns per unit of risk. The Cultural Investment Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  207.00  in Cultural Investment Holdings on September 30, 2024 and sell it today you would earn a total of  13.00  from holding Cultural Investment Holdings or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Shengda Mining Co  vs.  Cultural Investment Holdings

Shengda Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengda Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shengda Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cultural Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shengda Mining and Cultural Investment

The main advantage of trading using opposite Shengda Mining and Cultural Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shengda Mining position performs unexpectedly, Cultural Investment 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 Cultural Investment will offset losses from the drop in Cultural Investment's long position.

The idea behind Shengda Mining Co and Cultural Investment Holdings 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.

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.