Correlation Between SUNSEA Telecommunicatio and Anhui Transport

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Can any of the company-specific risk be diversified away by investing in both SUNSEA Telecommunicatio and Anhui Transport 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 SUNSEA Telecommunicatio and Anhui Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SUNSEA Telecommunications Co and Anhui Transport Consulting, you can compare the effects of market volatilities on SUNSEA Telecommunicatio and Anhui Transport 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 SUNSEA Telecommunicatio with a short position of Anhui Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUNSEA Telecommunicatio and Anhui Transport.

Diversification Opportunities for SUNSEA Telecommunicatio and Anhui Transport

SUNSEAAnhuiDiversified AwaySUNSEAAnhuiDiversified Away100%
0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between SUNSEA and Anhui is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SUNSEA Telecommunications Co and Anhui Transport Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Transport Cons and SUNSEA Telecommunicatio 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 SUNSEA Telecommunications Co are associated (or correlated) with Anhui Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Transport Cons has no effect on the direction of SUNSEA Telecommunicatio i.e., SUNSEA Telecommunicatio and Anhui Transport go up and down completely randomly.

Pair Corralation between SUNSEA Telecommunicatio and Anhui Transport

Assuming the 90 days trading horizon SUNSEA Telecommunications Co is expected to generate 1.62 times more return on investment than Anhui Transport. However, SUNSEA Telecommunicatio is 1.62 times more volatile than Anhui Transport Consulting. It trades about 0.27 of its potential returns per unit of risk. Anhui Transport Consulting is currently generating about 0.18 per unit of risk. If you would invest  574.00  in SUNSEA Telecommunications Co on September 15, 2024 and sell it today you would earn a total of  518.00  from holding SUNSEA Telecommunications Co or generate 90.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

SUNSEA Telecommunications Co  vs.  Anhui Transport Consulting

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 0102030405060
JavaScript chart by amCharts 3.21.15002313 603357
       Timeline  
SUNSEA Telecommunicatio 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SUNSEA Telecommunications Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SUNSEA Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec6789101112
Anhui Transport Cons 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Transport Consulting are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Transport sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec7.588.599.510

SUNSEA Telecommunicatio and Anhui Transport Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.82-9.6-6.38-3.170.03.447.0610.6914.3117.93 0.010.020.030.040.05
JavaScript chart by amCharts 3.21.15002313 603357
       Returns  

Pair Trading with SUNSEA Telecommunicatio and Anhui Transport

The main advantage of trading using opposite SUNSEA Telecommunicatio and Anhui Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUNSEA Telecommunicatio position performs unexpectedly, Anhui Transport 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 Anhui Transport will offset losses from the drop in Anhui Transport's long position.
The idea behind SUNSEA Telecommunications Co and Anhui Transport Consulting 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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