Correlation Between Sinosteel Engineering and Sinocat Environmental

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

By analyzing existing cross correlation between Sinosteel Engineering and and Sinocat Environmental Technology, you can compare the effects of market volatilities on Sinosteel Engineering and Sinocat Environmental 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 Sinosteel Engineering with a short position of Sinocat Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Engineering and Sinocat Environmental.

Diversification Opportunities for Sinosteel Engineering and Sinocat Environmental

0.75

Correlation Coefficient

Sinosteel Engineering  Sinocat Environmental

Poor diversification

The 3 months correlation between Sinosteel and Sinocat is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Engineering and and Sinocat Environmental Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocat Environmental and Sinosteel Engineering 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 Sinosteel Engineering and are associated (or correlated) with Sinocat Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocat Environmental has no effect on the direction of Sinosteel Engineering i.e., Sinosteel Engineering and Sinocat Environmental go up and down completely randomly.

Pair Corralation between Sinosteel Engineering and Sinocat Environmental

Assuming the 90 days trading horizon Sinosteel Engineering and is expected to under-perform the Sinocat Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Sinosteel Engineering and is 1.83 times less risky than Sinocat Environmental. The stock trades about -0.02 of its potential returns per unit of risk. The Sinocat Environmental Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,968  in Sinocat Environmental Technology on December 1, 2024 and sell it today you would lose (133.00) from holding Sinocat Environmental Technology or give up 6.76% of portfolio value over 90 days.

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

Sinosteel Engineering and  vs.  Sinocat Environmental Technolo

Sinosteel Engineering and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Engineering and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinosteel Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sinocat Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinocat Environmental Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinocat Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sinosteel Engineering and Sinocat Environmental

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

The idea behind Sinosteel Engineering and and Sinocat Environmental 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.