Correlation Between San Shing and National Aerospace

Can any of the company-specific risk be diversified away by investing in both San Shing and National Aerospace 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 San Shing and National Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Shing Fastech and National Aerospace Fasteners, you can compare the effects of market volatilities on San Shing and National Aerospace 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 San Shing with a short position of National Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Shing and National Aerospace.

Diversification Opportunities for San Shing and National Aerospace

0.23

Correlation Coefficient

San Shing  National Aerospace

Modest diversification

The 3 months correlation between San and National is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding San Shing Fastech and National Aerospace Fasteners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Aerospace and San Shing 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 San Shing Fastech are associated (or correlated) with National Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Aerospace has no effect on the direction of San Shing i.e., San Shing and National Aerospace go up and down completely randomly.

Pair Corralation between San Shing and National Aerospace

Assuming the 90 days trading horizon San Shing Fastech is expected to under-perform the National Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, San Shing Fastech is 2.13 times less risky than National Aerospace. The stock trades about -0.17 of its potential returns per unit of risk. The National Aerospace Fasteners is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  9,250  in National Aerospace Fasteners on September 23, 2024 and sell it today you would lose (270.00) from holding National Aerospace Fasteners or give up 2.92% of portfolio value over 90 days.

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

San Shing Fastech  vs.  National Aerospace Fasteners

San Shing Fastech

Risk-Adjusted Performance

0 of 100

Very Weak

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

National Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Aerospace Fasteners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, National Aerospace 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 San Shing and National Aerospace

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

The idea behind San Shing Fastech and National Aerospace Fasteners 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.