Correlation Between Shenyang Huitian and Sany Heavy

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

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

Diversification Opportunities for Shenyang Huitian and Sany Heavy

0.75

Correlation Coefficient

Shenyang Huitian  Sany Heavy

Poor diversification

The 3 months correlation between Shenyang and Sany is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy and Shenyang Huitian 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 Shenyang Huitian Thermal 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 Energy has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and Sany Heavy go up and down completely randomly.

Pair Corralation between Shenyang Huitian and Sany Heavy

Assuming the 90 days trading horizon Shenyang Huitian Thermal is expected to generate 1.36 times more return on investment than Sany Heavy. However, Shenyang Huitian is 1.36 times more volatile than Sany Heavy Energy. It trades about 0.05 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about 0.01 per unit of risk. If you would invest  243.00  in Shenyang Huitian Thermal on October 3, 2024 and sell it today you would earn a total of  106.00  from holding Shenyang Huitian Thermal or generate 43.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.74%
Values	Daily Returns

Shenyang Huitian Thermal  vs.  Sany Heavy Energy

Shenyang Huitian Thermal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Huitian Thermal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Huitian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sany Heavy Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sany Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenyang Huitian and Sany Heavy

The main advantage of trading using opposite Shenyang Huitian and Sany Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenyang Huitian 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 Shenyang Huitian Thermal and Sany Heavy Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.