Correlation Between Terex and Sany Heavy

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

By analyzing existing cross correlation between Terex and Sany Heavy Equipment, you can compare the effects of market volatilities on Terex and Sany Heavy 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 Terex with a short position of Sany Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terex and Sany Heavy.

Diversification Opportunities for Terex and Sany Heavy

0.23

Correlation Coefficient

Terex  Sany Heavy

Modest diversification

The 3 months correlation between Terex and Sany is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Terex and Sany Heavy Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Equipment and Terex 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 Terex are associated (or correlated) with Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Equipment has no effect on the direction of Terex i.e., Terex and Sany Heavy go up and down completely randomly.

Pair Corralation between Terex and Sany Heavy

Assuming the 90 days horizon Terex is expected to generate 1.39 times less return on investment than Sany Heavy. But when comparing it to its historical volatility, Terex is 1.8 times less risky than Sany Heavy. It trades about 0.1 of its potential returns per unit of risk. Sany Heavy Equipment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Sany Heavy Equipment on September 4, 2024 and sell it today you would earn a total of  8.00  from holding Sany Heavy Equipment or generate 15.69% return on investment over 90 days.

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

Terex  vs.  Sany Heavy Equipment

Terex

Risk-Adjusted Performance

7 of 100

OK

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

Sany Heavy Equipment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Equipment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sany Heavy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Terex and Sany Heavy

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

The idea behind Terex and Sany Heavy Equipment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.