Correlation Between Malion New and Shanghai CEO

Can any of the company-specific risk be diversified away by investing in both Malion New and Shanghai CEO 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 Malion New and Shanghai CEO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malion New Materials and Shanghai CEO Environmental, you can compare the effects of market volatilities on Malion New and Shanghai CEO 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 Malion New with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malion New and Shanghai CEO.

Diversification Opportunities for Malion New and Shanghai CEO

0.8

Correlation Coefficient

Malion New  Shanghai CEO

Very poor diversification

The 3 months correlation between Malion and Shanghai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Malion New Materials and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and Malion New 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 Malion New Materials are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Malion New i.e., Malion New and Shanghai CEO go up and down completely randomly.

Pair Corralation between Malion New and Shanghai CEO

Assuming the 90 days trading horizon Malion New Materials is expected to generate 1.71 times more return on investment than Shanghai CEO. However, Malion New is 1.71 times more volatile than Shanghai CEO Environmental. It trades about 0.06 of its potential returns per unit of risk. Shanghai CEO Environmental is currently generating about -0.03 per unit of risk. If you would invest  778.00  in Malion New Materials on September 30, 2024 and sell it today you would earn a total of  84.00  from holding Malion New Materials or generate 10.8% return on investment over 90 days.

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

Malion New Materials  vs.  Shanghai CEO Environmental

Malion New Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malion New Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Malion New sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Malion New and Shanghai CEO

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

The idea behind Malion New Materials and Shanghai CEO Environmental 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.