Correlation Between Focus Media and Sinosteel Luonai

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

By analyzing existing cross correlation between Focus Media Information and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Focus Media and Sinosteel Luonai 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 Focus Media with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Media and Sinosteel Luonai.

Diversification Opportunities for Focus Media and Sinosteel Luonai

0.79

Correlation Coefficient

Focus Media  Sinosteel Luonai

Poor diversification

The 3 months correlation between Focus and Sinosteel is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Focus Media Information and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Focus Media 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 Focus Media Information are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Focus Media i.e., Focus Media and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Focus Media and Sinosteel Luonai

Assuming the 90 days trading horizon Focus Media is expected to generate 1.43 times less return on investment than Sinosteel Luonai. But when comparing it to its historical volatility, Focus Media Information is 1.33 times less risky than Sinosteel Luonai. It trades about 0.08 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Sinosteel Luonai Materials on December 10, 2024 and sell it today you would earn a total of  80.00  from holding Sinosteel Luonai Materials or generate 26.94% return on investment over 90 days.

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

Focus Media Information  vs.  Sinosteel Luonai Materials

Focus Media Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Media Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sinosteel Luonai Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Luonai Materials 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.

Pair Trading with Focus Media and Sinosteel Luonai

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

The idea behind Focus Media Information and Sinosteel Luonai Materials 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.