Correlation Between Shandong Mining and Jiaozuo Wanfang

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Shandong Mining and Jiaozuo Wanfang 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 Shandong Mining and Jiaozuo Wanfang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shandong Mining Machinery and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on Shandong Mining and Jiaozuo Wanfang 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 Shandong Mining with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Mining and Jiaozuo Wanfang.

Diversification Opportunities for Shandong Mining and Jiaozuo Wanfang

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shandong and Jiaozuo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Mining Machinery and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Shandong 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 Shandong Mining Machinery are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Shandong Mining i.e., Shandong Mining and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Shandong Mining and Jiaozuo Wanfang

Assuming the 90 days trading horizon Shandong Mining Machinery is expected to generate 1.15 times more return on investment than Jiaozuo Wanfang. However, Shandong Mining is 1.15 times more volatile than Jiaozuo Wanfang Aluminum. It trades about 0.32 of its potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.15 per unit of risk. If you would invest  213.00  in Shandong Mining Machinery on September 5, 2024 and sell it today you would earn a total of  223.00  from holding Shandong Mining Machinery or generate 104.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shandong Mining Machinery  vs.  Jiaozuo Wanfang Aluminum

 Performance 
       Timeline  
Shandong Mining Machinery 

Risk-Adjusted Performance

25 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Mining Machinery are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Mining sustained solid returns over the last few months and may actually be approaching a breakup point.
Jiaozuo Wanfang Aluminum 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Mining and Jiaozuo Wanfang Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shandong Mining and Jiaozuo Wanfang

The main advantage of trading using opposite Shandong Mining and Jiaozuo Wanfang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Mining position performs unexpectedly, Jiaozuo Wanfang 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 Jiaozuo Wanfang will offset losses from the drop in Jiaozuo Wanfang's long position.
The idea behind Shandong Mining Machinery and Jiaozuo Wanfang Aluminum 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
CEOs Directory
Screen CEOs from public companies around the world