Correlation Between Shandong Gold and Chongqing Shunbo

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

By analyzing existing cross correlation between Shandong Gold Mining and Chongqing Shunbo Aluminum, you can compare the effects of market volatilities on Shandong Gold and Chongqing Shunbo 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 Gold with a short position of Chongqing Shunbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and Chongqing Shunbo.

Diversification Opportunities for Shandong Gold and Chongqing Shunbo

-0.46

Correlation Coefficient

Shandong Gold  Chongqing Shunbo

Very good diversification

The 3 months correlation between Shandong and Chongqing is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum and Shandong Gold 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 Gold Mining are associated (or correlated) with Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Shandong Gold i.e., Shandong Gold and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Shandong Gold and Chongqing Shunbo

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Chongqing Shunbo. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.67 times less risky than Chongqing Shunbo. The stock trades about -0.21 of its potential returns per unit of risk. The Chongqing Shunbo Aluminum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  671.00  in Chongqing Shunbo Aluminum on September 24, 2024 and sell it today you would earn a total of  9.00  from holding Chongqing Shunbo Aluminum or generate 1.34% return on investment over 90 days.

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

Shandong Gold Mining  vs.  Chongqing Shunbo Aluminum

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Shandong Gold and Chongqing Shunbo

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

The idea behind Shandong Gold Mining and Chongqing Shunbo 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.