Correlation Between Runjian Communication and Sanquan Food

Can any of the company-specific risk be diversified away by investing in both Runjian Communication and Sanquan Food 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 Runjian Communication and Sanquan Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Runjian Communication and Sanquan Food

0.65

Correlation Coefficient

Runjian Communication  Sanquan Food

Poor diversification

The 3 months correlation between Runjian and Sanquan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and Sanquan Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanquan Food and Runjian Communication 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 Runjian Communication Co are associated (or correlated) with Sanquan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanquan Food has no effect on the direction of Runjian Communication i.e., Runjian Communication and Sanquan Food go up and down completely randomly.

Pair Corralation between Runjian Communication and Sanquan Food

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 1.74 times more return on investment than Sanquan Food. However, Runjian Communication is 1.74 times more volatile than Sanquan Food Co. It trades about -0.01 of its potential returns per unit of risk. Sanquan Food Co is currently generating about -0.31 per unit of risk. If you would invest  3,116  in Runjian Communication Co on October 12, 2024 and sell it today you would lose (66.00) from holding Runjian Communication Co or give up 2.12% of portfolio value over 90 days.

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

Runjian Communication Co  vs.  Sanquan Food Co

Runjian Communication

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Runjian Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sanquan Food

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Runjian Communication and Sanquan Food

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

The idea behind Runjian Communication Co and Sanquan Food 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.