Correlation Between StShine Optical and United Orthopedic

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

By analyzing existing cross correlation between StShine Optical Co and United Orthopedic, you can compare the effects of market volatilities on StShine Optical and United Orthopedic 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 StShine Optical with a short position of United Orthopedic. Check out your portfolio center. Please also check ongoing floating volatility patterns of StShine Optical and United Orthopedic.

Diversification Opportunities for StShine Optical and United Orthopedic

0.33

Correlation Coefficient

StShine Optical  United Orthopedic

Weak diversification

The 3 months correlation between StShine and United is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding StShine Optical Co and United Orthopedic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Orthopedic and StShine Optical 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 StShine Optical Co are associated (or correlated) with United Orthopedic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Orthopedic has no effect on the direction of StShine Optical i.e., StShine Optical and United Orthopedic go up and down completely randomly.

Pair Corralation between StShine Optical and United Orthopedic

Assuming the 90 days trading horizon StShine Optical Co is expected to generate 1.86 times more return on investment than United Orthopedic. However, StShine Optical is 1.86 times more volatile than United Orthopedic. It trades about 0.23 of its potential returns per unit of risk. United Orthopedic is currently generating about 0.0 per unit of risk. If you would invest  17,150  in StShine Optical Co on September 5, 2024 and sell it today you would earn a total of  6,200  from holding StShine Optical Co or generate 36.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

StShine Optical Co  vs.  United Orthopedic

StShine Optical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in StShine Optical Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, StShine Optical showed solid returns over the last few months and may actually be approaching a breakup point.

United Orthopedic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Orthopedic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, United Orthopedic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with StShine Optical and United Orthopedic

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

The idea behind StShine Optical Co and United Orthopedic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.