Correlation Between Blue Sail and Shengtak New

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

By analyzing existing cross correlation between Blue Sail Medical and Shengtak New Material, you can compare the effects of market volatilities on Blue Sail and Shengtak New 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 Blue Sail with a short position of Shengtak New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and Shengtak New.

Diversification Opportunities for Blue Sail and Shengtak New

0.7

Correlation Coefficient

Blue Sail  Shengtak New

Poor diversification

The 3 months correlation between Blue and Shengtak is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Shengtak New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengtak New Material and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Shengtak New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengtak New Material has no effect on the direction of Blue Sail i.e., Blue Sail and Shengtak New go up and down completely randomly.

Pair Corralation between Blue Sail and Shengtak New

Assuming the 90 days trading horizon Blue Sail Medical is expected to generate 0.54 times more return on investment than Shengtak New. However, Blue Sail Medical is 1.84 times less risky than Shengtak New. It trades about 0.01 of its potential returns per unit of risk. Shengtak New Material is currently generating about 0.0 per unit of risk. If you would invest  532.00  in Blue Sail Medical on September 29, 2024 and sell it today you would lose (4.00) from holding Blue Sail Medical or give up 0.75% of portfolio value over 90 days.

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

Blue Sail Medical  vs.  Shengtak New Material

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shengtak New Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blue Sail and Shengtak New

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

The idea behind Blue Sail Medical and Shengtak New Material 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.