Correlation Between Sieyuan Electric and Shuhua Sports

Can any of the company-specific risk be diversified away by investing in both Sieyuan Electric and Shuhua Sports 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 Sieyuan Electric and Shuhua Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sieyuan Electric Co and Shuhua Sports Co, you can compare the effects of market volatilities on Sieyuan Electric and Shuhua Sports 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 Sieyuan Electric with a short position of Shuhua Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sieyuan Electric and Shuhua Sports.

Diversification Opportunities for Sieyuan Electric and Shuhua Sports

0.11

Correlation Coefficient

Sieyuan Electric  Shuhua Sports

Average diversification

The 3 months correlation between Sieyuan and Shuhua is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sieyuan Electric Co and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports and Sieyuan Electric 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 Sieyuan Electric Co are associated (or correlated) with Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Sieyuan Electric i.e., Sieyuan Electric and Shuhua Sports go up and down completely randomly.

Pair Corralation between Sieyuan Electric and Shuhua Sports

Assuming the 90 days trading horizon Sieyuan Electric Co is expected to generate 0.73 times more return on investment than Shuhua Sports. However, Sieyuan Electric Co is 1.37 times less risky than Shuhua Sports. It trades about 0.08 of its potential returns per unit of risk. Shuhua Sports Co is currently generating about 0.0 per unit of risk. If you would invest  3,972  in Sieyuan Electric Co on October 4, 2024 and sell it today you would earn a total of  3,298  from holding Sieyuan Electric Co or generate 83.03% return on investment over 90 days.

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

Sieyuan Electric Co  vs.  Shuhua Sports Co

Sieyuan Electric

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shuhua Sports

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sieyuan Electric and Shuhua Sports

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

The idea behind Sieyuan Electric Co and Shuhua Sports Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.