Correlation Between SH Energy and ASTORY CoLtd

Can any of the company-specific risk be diversified away by investing in both SH Energy and ASTORY CoLtd 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 SH Energy and ASTORY CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SH Energy Chemical and ASTORY CoLtd, you can compare the effects of market volatilities on SH Energy and ASTORY CoLtd 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 SH Energy with a short position of ASTORY CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and ASTORY CoLtd.

Diversification Opportunities for SH Energy and ASTORY CoLtd

0.04

Correlation Coefficient

SH Energy  ASTORY CoLtd

Significant diversification

The 3 months correlation between 002360 and ASTORY is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and ASTORY CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASTORY CoLtd and SH Energy 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 SH Energy Chemical are associated (or correlated) with ASTORY CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASTORY CoLtd has no effect on the direction of SH Energy i.e., SH Energy and ASTORY CoLtd go up and down completely randomly.

Pair Corralation between SH Energy and ASTORY CoLtd

Assuming the 90 days trading horizon SH Energy Chemical is expected to under-perform the ASTORY CoLtd. In addition to that, SH Energy is 1.19 times more volatile than ASTORY CoLtd. It trades about 0.0 of its total potential returns per unit of risk. ASTORY CoLtd is currently generating about 0.12 per unit of volatility. If you would invest  674,000  in ASTORY CoLtd on September 12, 2024 and sell it today you would earn a total of  137,000  from holding ASTORY CoLtd or generate 20.33% return on investment over 90 days.

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

SH Energy Chemical  vs.  ASTORY CoLtd

SH Energy Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

ASTORY CoLtd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASTORY CoLtd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ASTORY CoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SH Energy and ASTORY CoLtd

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

The idea behind SH Energy Chemical and ASTORY CoLtd 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.