Correlation Between Changzhou Almaden and Shenyang Huitian

Can any of the company-specific risk be diversified away by investing in both Changzhou Almaden and Shenyang Huitian 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 Changzhou Almaden and Shenyang Huitian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changzhou Almaden Co and Shenyang Huitian Thermal, you can compare the effects of market volatilities on Changzhou Almaden and Shenyang Huitian 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 Changzhou Almaden with a short position of Shenyang Huitian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changzhou Almaden and Shenyang Huitian.

Diversification Opportunities for Changzhou Almaden and Shenyang Huitian

0.87

Correlation Coefficient

Changzhou Almaden  Shenyang Huitian

Very poor diversification

The 3 months correlation between Changzhou and Shenyang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and Shenyang Huitian Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Huitian Thermal and Changzhou Almaden 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 Changzhou Almaden Co are associated (or correlated) with Shenyang Huitian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Huitian Thermal has no effect on the direction of Changzhou Almaden i.e., Changzhou Almaden and Shenyang Huitian go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Shenyang Huitian

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to generate 1.14 times more return on investment than Shenyang Huitian. However, Changzhou Almaden is 1.14 times more volatile than Shenyang Huitian Thermal. It trades about -0.02 of its potential returns per unit of risk. Shenyang Huitian Thermal is currently generating about -0.05 per unit of risk. If you would invest  1,857  in Changzhou Almaden Co on September 13, 2024 and sell it today you would lose (31.00) from holding Changzhou Almaden Co or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Changzhou Almaden Co  vs.  Shenyang Huitian Thermal

Changzhou Almaden

Risk-Adjusted Performance

11 of 100

OK

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

Shenyang Huitian Thermal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Huitian Thermal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Huitian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changzhou Almaden and Shenyang Huitian

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

The idea behind Changzhou Almaden Co and Shenyang Huitian Thermal 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..