Correlation Between Maven Brands and China SXT

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

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

Diversification Opportunities for Maven Brands and China SXT

0.27

Correlation Coefficient

Maven Brands  China SXT

Modest diversification

The 3 months correlation between Maven and China is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Maven Brands and China SXT Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China SXT Pharmaceuticals and Maven Brands 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 Maven Brands are associated (or correlated) with China SXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China SXT Pharmaceuticals has no effect on the direction of Maven Brands i.e., Maven Brands and China SXT go up and down completely randomly.

Pair Corralation between Maven Brands and China SXT

Assuming the 90 days horizon Maven Brands is expected to generate 15.85 times more return on investment than China SXT. However, Maven Brands is 15.85 times more volatile than China SXT Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. China SXT Pharmaceuticals is currently generating about -0.06 per unit of risk. If you would invest  0.01  in Maven Brands on September 16, 2024 and sell it today you would lose (0.01) from holding Maven Brands or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Maven Brands  vs.  China SXT Pharmaceuticals

Maven Brands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maven Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Maven Brands reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Maven Brands and China SXT

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

The idea behind Maven Brands and China SXT Pharmaceuticals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.