Correlation Between Safe and Shanghai Electric

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

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

Diversification Opportunities for Safe and Shanghai Electric

-0.77

Correlation Coefficient

Safe  Shanghai Electric

Pay attention - limited upside

The 3 months correlation between Safe and Shanghai is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Safe and Green and Shanghai Electric Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Electric and Safe 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 Safe and Green are associated (or correlated) with Shanghai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Electric has no effect on the direction of Safe i.e., Safe and Shanghai Electric go up and down completely randomly.

Pair Corralation between Safe and Shanghai Electric

Considering the 90-day investment horizon Safe and Green is expected to under-perform the Shanghai Electric. But the stock apears to be less risky and, when comparing its historical volatility, Safe and Green is 1.26 times less risky than Shanghai Electric. The stock trades about -0.1 of its potential returns per unit of risk. The Shanghai Electric Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  370.00  in Shanghai Electric Group on September 4, 2024 and sell it today you would earn a total of  340.00  from holding Shanghai Electric Group or generate 91.89% return on investment over 90 days.

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

Safe and Green  vs.  Shanghai Electric Group

Safe and Green

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe and Green has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shanghai Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Electric Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Shanghai Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe and Shanghai Electric

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

The idea behind Safe and Green and Shanghai Electric Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.