Correlation Between Shandong Publishing and Hua Xia

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

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

Diversification Opportunities for Shandong Publishing and Hua Xia

-0.57

Correlation Coefficient

Shandong Publishing  Hua Xia

Excellent diversification

The 3 months correlation between Shandong and Hua is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Hua Xia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Xia Bank and Shandong Publishing 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 Publishing Media are associated (or correlated) with Hua Xia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Xia Bank has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Hua Xia go up and down completely randomly.

Pair Corralation between Shandong Publishing and Hua Xia

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Hua Xia. In addition to that, Shandong Publishing is 1.0 times more volatile than Hua Xia Bank. It trades about -0.11 of its total potential returns per unit of risk. Hua Xia Bank is currently generating about 0.14 per unit of volatility. If you would invest  647.00  in Hua Xia Bank on September 5, 2024 and sell it today you would earn a total of  119.00  from holding Hua Xia Bank or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shandong Publishing Media  vs.  Hua Xia Bank

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Publishing Media 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.

Hua Xia Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Xia Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hua Xia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and Hua Xia

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

The idea behind Shandong Publishing Media and Hua Xia Bank 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.