Correlation Between Sinocelltech and Metro Investment

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

By analyzing existing cross correlation between Sinocelltech Group and Metro Investment Development, you can compare the effects of market volatilities on Sinocelltech and Metro Investment 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 Sinocelltech with a short position of Metro Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocelltech and Metro Investment.

Diversification Opportunities for Sinocelltech and Metro Investment

0.51

Correlation Coefficient

Sinocelltech  Metro Investment

Very weak diversification

The 3 months correlation between Sinocelltech and Metro is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sinocelltech Group and Metro Investment Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Investment Dev and Sinocelltech 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 Sinocelltech Group are associated (or correlated) with Metro Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Investment Dev has no effect on the direction of Sinocelltech i.e., Sinocelltech and Metro Investment go up and down completely randomly.

Pair Corralation between Sinocelltech and Metro Investment

Assuming the 90 days trading horizon Sinocelltech Group is expected to generate 1.08 times more return on investment than Metro Investment. However, Sinocelltech is 1.08 times more volatile than Metro Investment Development. It trades about -0.04 of its potential returns per unit of risk. Metro Investment Development is currently generating about -0.13 per unit of risk. If you would invest  4,136  in Sinocelltech Group on September 28, 2024 and sell it today you would lose (426.00) from holding Sinocelltech Group or give up 10.3% of portfolio value over 90 days.

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

Sinocelltech Group  vs.  Metro Investment Development

Sinocelltech Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinocelltech Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sinocelltech and Metro Investment

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

The idea behind Sinocelltech Group and Metro Investment Development 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.