Correlation Between Shenyang Chemical and Xinyaqiang Silicon

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

By analyzing existing cross correlation between Shenyang Chemical Industry and Xinyaqiang Silicon Chemistry, you can compare the effects of market volatilities on Shenyang Chemical and Xinyaqiang Silicon 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 Chemical with a short position of Xinyaqiang Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and Xinyaqiang Silicon.

Diversification Opportunities for Shenyang Chemical and Xinyaqiang Silicon

0.57

Correlation Coefficient

Shenyang Chemical  Xinyaqiang Silicon

Very weak diversification

The 3 months correlation between Shenyang and Xinyaqiang is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Xinyaqiang Silicon Chemistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyaqiang Silicon and Shenyang Chemical 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 Chemical Industry are associated (or correlated) with Xinyaqiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyaqiang Silicon has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Xinyaqiang Silicon go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Xinyaqiang Silicon

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to generate 1.07 times more return on investment than Xinyaqiang Silicon. However, Shenyang Chemical is 1.07 times more volatile than Xinyaqiang Silicon Chemistry. It trades about 0.05 of its potential returns per unit of risk. Xinyaqiang Silicon Chemistry is currently generating about 0.0 per unit of risk. If you would invest  304.00  in Shenyang Chemical Industry on October 9, 2024 and sell it today you would earn a total of  23.00  from holding Shenyang Chemical Industry or generate 7.57% return on investment over 90 days.

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

Shenyang Chemical Industry  vs.  Xinyaqiang Silicon Chemistry

Shenyang Chemical

Risk-Adjusted Performance

3 of 100

Weak

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

Xinyaqiang Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinyaqiang Silicon Chemistry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xinyaqiang Silicon 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 Chemical and Xinyaqiang Silicon

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

The idea behind Shenyang Chemical Industry and Xinyaqiang Silicon Chemistry 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.