Correlation Between Muyuan Foodstuff and Sinomach General

Can any of the company-specific risk be diversified away by investing in both Muyuan Foodstuff and Sinomach General 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 Muyuan Foodstuff and Sinomach General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Muyuan Foodstuff Co and Sinomach General Machinery, you can compare the effects of market volatilities on Muyuan Foodstuff and Sinomach General 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 Muyuan Foodstuff with a short position of Sinomach General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muyuan Foodstuff and Sinomach General.

Diversification Opportunities for Muyuan Foodstuff and Sinomach General

0.24

Correlation Coefficient

Muyuan Foodstuff  Sinomach General

Modest diversification

The 3 months correlation between Muyuan and Sinomach is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Muyuan Foodstuff Co and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac and Muyuan Foodstuff 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 Muyuan Foodstuff Co are associated (or correlated) with Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Muyuan Foodstuff i.e., Muyuan Foodstuff and Sinomach General go up and down completely randomly.

Pair Corralation between Muyuan Foodstuff and Sinomach General

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to under-perform the Sinomach General. But the stock apears to be less risky and, when comparing its historical volatility, Muyuan Foodstuff Co is 2.5 times less risky than Sinomach General. The stock trades about -0.11 of its potential returns per unit of risk. The Sinomach General Machinery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,404  in Sinomach General Machinery on October 11, 2024 and sell it today you would earn a total of  50.00  from holding Sinomach General Machinery or generate 3.56% return on investment over 90 days.

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

Muyuan Foodstuff Co  vs.  Sinomach General Machinery

Muyuan Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muyuan Foodstuff Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sinomach General Mac

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Muyuan Foodstuff and Sinomach General

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

The idea behind Muyuan Foodstuff Co and Sinomach General Machinery 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.