Correlation Between Shandong Sanyuan and Gansu Huangtai

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

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

Diversification Opportunities for Shandong Sanyuan and Gansu Huangtai

0.79

Correlation Coefficient

Shandong Sanyuan  Gansu Huangtai

Poor diversification

The 3 months correlation between Shandong and Gansu is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Gansu Huangtai Wine marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Huangtai Wine and Shandong Sanyuan 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 Shandong Sanyuan Biotechnology are associated (or correlated) with Gansu Huangtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Huangtai Wine has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Gansu Huangtai go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Gansu Huangtai

Assuming the 90 days trading horizon Shandong Sanyuan is expected to generate 2.92 times less return on investment than Gansu Huangtai. But when comparing it to its historical volatility, Shandong Sanyuan Biotechnology is 1.71 times less risky than Gansu Huangtai. It trades about 0.11 of its potential returns per unit of risk. Gansu Huangtai Wine marketing is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Gansu Huangtai Wine marketing on September 21, 2024 and sell it today you would earn a total of  649.00  from holding Gansu Huangtai Wine marketing or generate 61.17% return on investment over 90 days.

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

Shandong Sanyuan Biotechnology  vs.  Gansu Huangtai Wine marketing

Shandong Sanyuan Bio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Sanyuan Biotechnology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Sanyuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Gansu Huangtai Wine

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Huangtai Wine marketing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Huangtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Sanyuan and Gansu Huangtai

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

The idea behind Shandong Sanyuan Biotechnology and Gansu Huangtai Wine marketing 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.