Correlation Between Shanghai Sanyou and Xiangyu Medical

Can any of the company-specific risk be diversified away by investing in both Shanghai Sanyou and Xiangyu Medical 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 Xiangyu Medical 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 Xiangyu Medical Co, you can compare the effects of market volatilities on Shanghai Sanyou and Xiangyu Medical 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 Xiangyu Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Sanyou and Xiangyu Medical.

Diversification Opportunities for Shanghai Sanyou and Xiangyu Medical

0.78

Correlation Coefficient

Shanghai Sanyou  Xiangyu Medical

Poor diversification

The 3 months correlation between Shanghai and Xiangyu is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Xiangyu Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyu Medical 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 Xiangyu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyu Medical has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Xiangyu Medical go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Xiangyu Medical

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to generate 0.76 times more return on investment than Xiangyu Medical. However, Shanghai Sanyou Medical is 1.31 times less risky than Xiangyu Medical. It trades about 0.01 of its potential returns per unit of risk. Xiangyu Medical Co is currently generating about 0.0 per unit of risk. If you would invest  2,106  in Shanghai Sanyou Medical on September 30, 2024 and sell it today you would lose (6.00) from holding Shanghai Sanyou Medical or give up 0.28% of portfolio value over 90 days.

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

Shanghai Sanyou Medical  vs.  Xiangyu Medical Co

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.

Xiangyu Medical

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Shanghai Sanyou and Xiangyu Medical

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

The idea behind Shanghai Sanyou Medical and Xiangyu Medical Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.