Correlation Between Sinosteel Luonai and Circuit Fabology

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

By analyzing existing cross correlation between Sinosteel Luonai Materials and Circuit Fabology Microelectronics, you can compare the effects of market volatilities on Sinosteel Luonai and Circuit Fabology 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 Sinosteel Luonai with a short position of Circuit Fabology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Luonai and Circuit Fabology.

Diversification Opportunities for Sinosteel Luonai and Circuit Fabology

0.78

Correlation Coefficient

Sinosteel Luonai  Circuit Fabology

Poor diversification

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

Pair Corralation between Sinosteel Luonai and Circuit Fabology

Assuming the 90 days trading horizon Sinosteel Luonai Materials is expected to generate 0.77 times more return on investment than Circuit Fabology. However, Sinosteel Luonai Materials is 1.29 times less risky than Circuit Fabology. It trades about 0.03 of its potential returns per unit of risk. Circuit Fabology Microelectronics is currently generating about -0.01 per unit of risk. If you would invest  391.00  in Sinosteel Luonai Materials on September 30, 2024 and sell it today you would earn a total of  14.00  from holding Sinosteel Luonai Materials or generate 3.58% return on investment over 90 days.

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

Sinosteel Luonai Materials  vs.  Circuit Fabology Microelectron

Sinosteel Luonai Mat

Risk-Adjusted Performance

2 of 100

Weak

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

Circuit Fabology Mic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Circuit Fabology Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Circuit Fabology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sinosteel Luonai and Circuit Fabology

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

The idea behind Sinosteel Luonai Materials and Circuit Fabology Microelectronics 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.