Correlation Between Industrial and Shanghai Lingyun

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

By analyzing existing cross correlation between Industrial and Commercial and Shanghai Lingyun Industries, you can compare the effects of market volatilities on Industrial and Shanghai Lingyun 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 Industrial with a short position of Shanghai Lingyun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Shanghai Lingyun.

Diversification Opportunities for Industrial and Shanghai Lingyun

0.24

Correlation Coefficient

Industrial  Shanghai Lingyun

Modest diversification

The 3 months correlation between Industrial and Shanghai is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind and Industrial 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 Industrial and Commercial are associated (or correlated) with Shanghai Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of Industrial i.e., Industrial and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between Industrial and Shanghai Lingyun

Assuming the 90 days trading horizon Industrial is expected to generate 5.47 times less return on investment than Shanghai Lingyun. But when comparing it to its historical volatility, Industrial and Commercial is 3.08 times less risky than Shanghai Lingyun. It trades about 0.08 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Shanghai Lingyun Industries on September 3, 2024 and sell it today you would earn a total of  11.00  from holding Shanghai Lingyun Industries or generate 39.29% return on investment over 90 days.

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

Industrial and Commercial  vs.  Shanghai Lingyun Industries

Industrial and Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shanghai Lingyun Ind

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Industrial and Shanghai Lingyun

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

The idea behind Industrial and Commercial and Shanghai Lingyun Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.