Correlation Between Shanghai Sanyou and AVCON Information

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

By analyzing existing cross correlation between Shanghai Sanyou Medical and AVCON Information Tech, you can compare the effects of market volatilities on Shanghai Sanyou and AVCON Information 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 Shanghai Sanyou with a short position of AVCON Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Sanyou and AVCON Information.

Diversification Opportunities for Shanghai Sanyou and AVCON Information

0.86

Correlation Coefficient

Shanghai Sanyou  AVCON Information

Very poor diversification

The 3 months correlation between Shanghai and AVCON is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and AVCON Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVCON Information Tech and Shanghai Sanyou 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 Shanghai Sanyou Medical are associated (or correlated) with AVCON Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVCON Information Tech has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and AVCON Information go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and AVCON Information

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the AVCON Information. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Sanyou Medical is 1.26 times less risky than AVCON Information. The stock trades about 0.0 of its potential returns per unit of risk. The AVCON Information Tech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  389.00  in AVCON Information Tech on September 29, 2024 and sell it today you would earn a total of  32.00  from holding AVCON Information Tech or generate 8.23% return on investment over 90 days.

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

Shanghai Sanyou Medical  vs.  AVCON Information Tech

Shanghai Sanyou Medical

Risk-Adjusted Performance

2 of 100

Weak

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

AVCON Information Tech

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Shanghai Sanyou and AVCON Information

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

The idea behind Shanghai Sanyou Medical and AVCON Information Tech 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.