Correlation Between Sinotrans and EmbedWay TechCorp

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

By analyzing existing cross correlation between Sinotrans Ltd Class and EmbedWay TechCorp, you can compare the effects of market volatilities on Sinotrans and EmbedWay TechCorp 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 Sinotrans with a short position of EmbedWay TechCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and EmbedWay TechCorp.

Diversification Opportunities for Sinotrans and EmbedWay TechCorp

0.65

Correlation Coefficient

Sinotrans  EmbedWay TechCorp

Poor diversification

The 3 months correlation between Sinotrans and EmbedWay is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and EmbedWay TechCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EmbedWay TechCorp and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with EmbedWay TechCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EmbedWay TechCorp has no effect on the direction of Sinotrans i.e., Sinotrans and EmbedWay TechCorp go up and down completely randomly.

Pair Corralation between Sinotrans and EmbedWay TechCorp

Assuming the 90 days trading horizon Sinotrans is expected to generate 1.43 times less return on investment than EmbedWay TechCorp. But when comparing it to its historical volatility, Sinotrans Ltd Class is 1.74 times less risky than EmbedWay TechCorp. It trades about 0.04 of its potential returns per unit of risk. EmbedWay TechCorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,360  in EmbedWay TechCorp on September 27, 2024 and sell it today you would earn a total of  89.00  from holding EmbedWay TechCorp or generate 3.77% return on investment over 90 days.

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

Sinotrans Ltd Class  vs.  EmbedWay TechCorp

Sinotrans Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sinotrans Ltd Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinotrans is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EmbedWay TechCorp

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EmbedWay TechCorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EmbedWay TechCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sinotrans and EmbedWay TechCorp

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

The idea behind Sinotrans Ltd Class and EmbedWay TechCorp 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 Global Correlations module to find global opportunities by holding instruments from different markets.