Correlation Between Shandong Polymer and Sinofibers Technology

Can any of the company-specific risk be diversified away by investing in both Shandong Polymer and Sinofibers Technology 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 Shandong Polymer and Sinofibers Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Polymer Biochemicals and Sinofibers Technology Co, you can compare the effects of market volatilities on Shandong Polymer and Sinofibers Technology 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 Shandong Polymer with a short position of Sinofibers Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Polymer and Sinofibers Technology.

Diversification Opportunities for Shandong Polymer and Sinofibers Technology

0.26

Correlation Coefficient

Shandong Polymer  Sinofibers Technology

Modest diversification

The 3 months correlation between Shandong and Sinofibers is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and Sinofibers Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinofibers Technology and Shandong Polymer 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 Shandong Polymer Biochemicals are associated (or correlated) with Sinofibers Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinofibers Technology has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and Sinofibers Technology go up and down completely randomly.

Pair Corralation between Shandong Polymer and Sinofibers Technology

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to under-perform the Sinofibers Technology. In addition to that, Shandong Polymer is 1.17 times more volatile than Sinofibers Technology Co. It trades about -0.27 of its total potential returns per unit of risk. Sinofibers Technology Co is currently generating about -0.04 per unit of volatility. If you would invest  2,747  in Sinofibers Technology Co on October 11, 2024 and sell it today you would lose (72.00) from holding Sinofibers Technology Co or give up 2.62% of portfolio value over 90 days.

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

Shandong Polymer Biochemicals  vs.  Sinofibers Technology Co

Shandong Polymer Bio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Polymer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sinofibers Technology

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Shandong Polymer and Sinofibers Technology

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

The idea behind Shandong Polymer Biochemicals and Sinofibers Technology 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.