Correlation Between Huaibei Mining and Shanghai Pudong

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

By analyzing existing cross correlation between Huaibei Mining Holdings and Shanghai Pudong Development, you can compare the effects of market volatilities on Huaibei Mining and Shanghai Pudong 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 Huaibei Mining with a short position of Shanghai Pudong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaibei Mining and Shanghai Pudong.

Diversification Opportunities for Huaibei Mining and Shanghai Pudong

0.64

Correlation Coefficient

Huaibei Mining  Shanghai Pudong

Poor diversification

The 3 months correlation between Huaibei and Shanghai is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Huaibei Mining Holdings and Shanghai Pudong Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Pudong Deve and Huaibei 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 Huaibei Mining Holdings are associated (or correlated) with Shanghai Pudong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Pudong Deve has no effect on the direction of Huaibei Mining i.e., Huaibei Mining and Shanghai Pudong go up and down completely randomly.

Pair Corralation between Huaibei Mining and Shanghai Pudong

Assuming the 90 days trading horizon Huaibei Mining Holdings is expected to under-perform the Shanghai Pudong. In addition to that, Huaibei Mining is 1.02 times more volatile than Shanghai Pudong Development. It trades about -0.2 of its total potential returns per unit of risk. Shanghai Pudong Development is currently generating about 0.32 per unit of volatility. If you would invest  943.00  in Shanghai Pudong Development on September 28, 2024 and sell it today you would earn a total of  91.00  from holding Shanghai Pudong Development or generate 9.65% return on investment over 90 days.

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

Huaibei Mining Holdings  vs.  Shanghai Pudong Development

Huaibei Mining Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaibei Mining Holdings 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.

Shanghai Pudong Deve

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Pudong Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Pudong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huaibei Mining and Shanghai Pudong

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

The idea behind Huaibei Mining Holdings and Shanghai Pudong Development 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 CEOs Directory module to screen CEOs from public companies around the world.