Correlation Between Gansu Huangtai and Shandong Sanyuan

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

By analyzing existing cross correlation between Gansu Huangtai Wine marketing and Shandong Sanyuan Biotechnology, you can compare the effects of market volatilities on Gansu Huangtai and Shandong Sanyuan 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 Gansu Huangtai with a short position of Shandong Sanyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Huangtai and Shandong Sanyuan.

Diversification Opportunities for Gansu Huangtai and Shandong Sanyuan

0.59

Correlation Coefficient

Gansu Huangtai  Shandong Sanyuan

Very weak diversification

The 3 months correlation between Gansu and Shandong is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Huangtai Wine marketing and Shandong Sanyuan Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sanyuan Bio and Gansu Huangtai 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 Gansu Huangtai Wine marketing are associated (or correlated) with Shandong Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sanyuan Bio has no effect on the direction of Gansu Huangtai i.e., Gansu Huangtai and Shandong Sanyuan go up and down completely randomly.

Pair Corralation between Gansu Huangtai and Shandong Sanyuan

Assuming the 90 days trading horizon Gansu Huangtai Wine marketing is expected to generate 1.83 times more return on investment than Shandong Sanyuan. However, Gansu Huangtai is 1.83 times more volatile than Shandong Sanyuan Biotechnology. It trades about 0.04 of its potential returns per unit of risk. Shandong Sanyuan Biotechnology is currently generating about -0.01 per unit of risk. If you would invest  1,455  in Gansu Huangtai Wine marketing on September 30, 2024 and sell it today you would earn a total of  82.00  from holding Gansu Huangtai Wine marketing or generate 5.64% return on investment over 90 days.

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

Gansu Huangtai Wine marketing  vs.  Shandong Sanyuan Biotechnology

Gansu Huangtai Wine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shandong Sanyuan Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Sanyuan Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Sanyuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gansu Huangtai and Shandong Sanyuan

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

The idea behind Gansu Huangtai Wine marketing and Shandong Sanyuan Biotechnology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.