Correlation Between China SXT and Stemsation International

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

By analyzing existing cross correlation between China SXT Pharmaceuticals and Stemsation International, you can compare the effects of market volatilities on China SXT and Stemsation International 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 China SXT with a short position of Stemsation International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China SXT and Stemsation International.

Diversification Opportunities for China SXT and Stemsation International

0.59

Correlation Coefficient

China SXT  Stemsation International

Very weak diversification

The 3 months correlation between China and Stemsation is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding China SXT Pharmaceuticals and Stemsation International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stemsation International and China SXT 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 China SXT Pharmaceuticals are associated (or correlated) with Stemsation International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stemsation International has no effect on the direction of China SXT i.e., China SXT and Stemsation International go up and down completely randomly.

Pair Corralation between China SXT and Stemsation International

Given the investment horizon of 90 days China SXT Pharmaceuticals is expected to under-perform the Stemsation International. But the stock apears to be less risky and, when comparing its historical volatility, China SXT Pharmaceuticals is 2.69 times less risky than Stemsation International. The stock trades about -0.05 of its potential returns per unit of risk. The Stemsation International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.95  in Stemsation International on September 14, 2024 and sell it today you would lose (1.85) from holding Stemsation International or give up 46.84% of portfolio value over 90 days.

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

China SXT Pharmaceuticals  vs.  Stemsation International

China SXT Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China SXT Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Stemsation International

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stemsation International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Stemsation International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China SXT and Stemsation International

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

The idea behind China SXT Pharmaceuticals and Stemsation International 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.