Correlation Between Shandong Ruifeng and Threes Company

Can any of the company-specific risk be diversified away by investing in both Shandong Ruifeng and Threes Company 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 Ruifeng and Threes Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Ruifeng Chemical and Threes Company Media, you can compare the effects of market volatilities on Shandong Ruifeng and Threes Company 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 Ruifeng with a short position of Threes Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Ruifeng and Threes Company.

Diversification Opportunities for Shandong Ruifeng and Threes Company

0.33

Correlation Coefficient

Shandong Ruifeng  Threes Company

Weak diversification

The 3 months correlation between Shandong and Threes is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Ruifeng Chemical and Threes Company Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Threes Company and Shandong Ruifeng 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 Ruifeng Chemical are associated (or correlated) with Threes Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Threes Company has no effect on the direction of Shandong Ruifeng i.e., Shandong Ruifeng and Threes Company go up and down completely randomly.

Pair Corralation between Shandong Ruifeng and Threes Company

Assuming the 90 days trading horizon Shandong Ruifeng is expected to generate 1.9 times less return on investment than Threes Company. In addition to that, Shandong Ruifeng is 1.14 times more volatile than Threes Company Media. It trades about 0.04 of its total potential returns per unit of risk. Threes Company Media is currently generating about 0.09 per unit of volatility. If you would invest  3,239  in Threes Company Media on September 29, 2024 and sell it today you would earn a total of  601.00  from holding Threes Company Media or generate 18.56% return on investment over 90 days.

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

Shandong Ruifeng Chemical  vs.  Threes Company Media

Shandong Ruifeng Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Threes Company

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Threes Company Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Threes Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Ruifeng and Threes Company

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

The idea behind Shandong Ruifeng Chemical and Threes Company Media 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.