Correlation Between Simei Media and Shuhua Sports

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

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

Diversification Opportunities for Simei Media and Shuhua Sports

0.48

Correlation Coefficient

Simei Media  Shuhua Sports

Very weak diversification

The 3 months correlation between Simei and Shuhua is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Simei Media 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 Simei 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 Simei Media 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 Simei Media i.e., Simei Media and Shuhua Sports go up and down completely randomly.

Pair Corralation between Simei Media and Shuhua Sports

Assuming the 90 days trading horizon Simei Media is expected to generate 2.47 times less return on investment than Shuhua Sports. In addition to that, Simei Media is 1.05 times more volatile than Shuhua Sports Co. It trades about 0.03 of its total potential returns per unit of risk. Shuhua Sports Co is currently generating about 0.07 per unit of volatility. If you would invest  798.00  in Shuhua Sports Co on December 24, 2024 and sell it today you would earn a total of  93.00  from holding Shuhua Sports Co or generate 11.65% return on investment over 90 days.

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

Simei Media Co  vs.  Shuhua Sports Co

Simei Media

Risk-Adjusted Performance

Weak

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

Shuhua Sports

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simei Media and Shuhua Sports

The main advantage of trading using opposite Simei Media and Shuhua Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simei Media 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 Simei Media 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.