Correlation Between Shandong Sanyuan and Songz Automobile

Can any of the company-specific risk be diversified away by investing in both Shandong Sanyuan and Songz Automobile 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 Songz Automobile 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 Songz Automobile Air, you can compare the effects of market volatilities on Shandong Sanyuan and Songz Automobile 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 Songz Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sanyuan and Songz Automobile.

Diversification Opportunities for Shandong Sanyuan and Songz Automobile

0.72

Correlation Coefficient

Shandong Sanyuan  Songz Automobile

Poor diversification

The 3 months correlation between Shandong and Songz is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Songz Automobile Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songz Automobile Air 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 Songz Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songz Automobile Air has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Songz Automobile go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Songz Automobile

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the Songz Automobile. In addition to that, Shandong Sanyuan is 1.02 times more volatile than Songz Automobile Air. It trades about -0.01 of its total potential returns per unit of risk. Songz Automobile Air is currently generating about 0.05 per unit of volatility. If you would invest  645.00  in Songz Automobile Air on September 30, 2024 and sell it today you would earn a total of  33.00  from holding Songz Automobile Air or generate 5.12% 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.  Songz Automobile Air

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.

Songz Automobile Air

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Shandong Sanyuan and Songz Automobile

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

The idea behind Shandong Sanyuan Biotechnology and Songz Automobile Air 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.