Correlation Between SUNSEA Telecommunicatio and Shanghai Putailai

Can any of the company-specific risk be diversified away by investing in both SUNSEA Telecommunicatio and Shanghai Putailai 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 SUNSEA Telecommunicatio and Shanghai Putailai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SUNSEA Telecommunications Co and Shanghai Putailai New, you can compare the effects of market volatilities on SUNSEA Telecommunicatio and Shanghai Putailai 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 SUNSEA Telecommunicatio with a short position of Shanghai Putailai. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUNSEA Telecommunicatio and Shanghai Putailai.

Diversification Opportunities for SUNSEA Telecommunicatio and Shanghai Putailai

0.53

Correlation Coefficient

SUNSEA Telecommunicatio  Shanghai Putailai

Very weak diversification

The 3 months correlation between SUNSEA and Shanghai is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SUNSEA Telecommunications Co and Shanghai Putailai New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Putailai New and SUNSEA Telecommunicatio 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 SUNSEA Telecommunications Co are associated (or correlated) with Shanghai Putailai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Putailai New has no effect on the direction of SUNSEA Telecommunicatio i.e., SUNSEA Telecommunicatio and Shanghai Putailai go up and down completely randomly.

Pair Corralation between SUNSEA Telecommunicatio and Shanghai Putailai

Assuming the 90 days trading horizon SUNSEA Telecommunications Co is expected to generate 1.22 times more return on investment than Shanghai Putailai. However, SUNSEA Telecommunicatio is 1.22 times more volatile than Shanghai Putailai New. It trades about 0.04 of its potential returns per unit of risk. Shanghai Putailai New is currently generating about -0.02 per unit of risk. If you would invest  813.00  in SUNSEA Telecommunications Co on October 8, 2024 and sell it today you would earn a total of  34.00  from holding SUNSEA Telecommunications Co or generate 4.18% return on investment over 90 days.

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

SUNSEA Telecommunications Co  vs.  Shanghai Putailai New

SUNSEA Telecommunicatio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SUNSEA Telecommunications Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SUNSEA Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai Putailai New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SUNSEA Telecommunicatio and Shanghai Putailai

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

The idea behind SUNSEA Telecommunications Co and Shanghai Putailai New 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.