Correlation Between Ruentex Development and San Fu

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

By analyzing existing cross correlation between Ruentex Development Co and San Fu Chemical, you can compare the effects of market volatilities on Ruentex Development and San Fu 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 Ruentex Development with a short position of San Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and San Fu.

Diversification Opportunities for Ruentex Development and San Fu

0.14

Correlation Coefficient

Ruentex Development  San Fu

Average diversification

The 3 months correlation between Ruentex and San is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and San Fu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fu Chemical and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with San Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fu Chemical has no effect on the direction of Ruentex Development i.e., Ruentex Development and San Fu go up and down completely randomly.

Pair Corralation between Ruentex Development and San Fu

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the San Fu. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 3.29 times less risky than San Fu. The stock trades about -0.16 of its potential returns per unit of risk. The San Fu Chemical is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,300  in San Fu Chemical on September 13, 2024 and sell it today you would earn a total of  1,550  from holding San Fu Chemical or generate 12.6% return on investment over 90 days.

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

Ruentex Development Co  vs.  San Fu Chemical

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

San Fu Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in San Fu Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, San Fu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ruentex Development and San Fu

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

The idea behind Ruentex Development Co and San Fu Chemical 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.