Correlation Between Shenyang Chemical and Biwin Storage

Can any of the company-specific risk be diversified away by investing in both Shenyang Chemical and Biwin Storage 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 Biwin Storage 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 Biwin Storage Technology, you can compare the effects of market volatilities on Shenyang Chemical and Biwin Storage 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 Biwin Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Chemical and Biwin Storage.

Diversification Opportunities for Shenyang Chemical and Biwin Storage

-0.22

Correlation Coefficient

Shenyang Chemical  Biwin Storage

Very good diversification

The 3 months correlation between Shenyang and Biwin is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Chemical Industry and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology 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 Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Shenyang Chemical i.e., Shenyang Chemical and Biwin Storage go up and down completely randomly.

Pair Corralation between Shenyang Chemical and Biwin Storage

Assuming the 90 days trading horizon Shenyang Chemical Industry is expected to under-perform the Biwin Storage. But the stock apears to be less risky and, when comparing its historical volatility, Shenyang Chemical Industry is 1.99 times less risky than Biwin Storage. The stock trades about -0.02 of its potential returns per unit of risk. The Biwin Storage Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,347  in Biwin Storage Technology on December 2, 2024 and sell it today you would earn a total of  4,159  from holding Biwin Storage Technology or generate 124.26% return on investment over 90 days.

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

Shenyang Chemical Industry  vs.  Biwin Storage Technology

Shenyang Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenyang Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Biwin Storage Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biwin Storage Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Biwin Storage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenyang Chemical and Biwin Storage

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

The idea behind Shenyang Chemical Industry and Biwin Storage Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.