Correlation Between Guilin Seamild and Shanghai Sanyou

Can any of the company-specific risk be diversified away by investing in both Guilin Seamild and Shanghai Sanyou 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 Guilin Seamild and Shanghai Sanyou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guilin Seamild Foods and Shanghai Sanyou Medical, you can compare the effects of market volatilities on Guilin Seamild and Shanghai Sanyou 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 Guilin Seamild with a short position of Shanghai Sanyou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guilin Seamild and Shanghai Sanyou.

Diversification Opportunities for Guilin Seamild and Shanghai Sanyou

0.48

Correlation Coefficient

Guilin Seamild  Shanghai Sanyou

Very weak diversification

The 3 months correlation between Guilin and Shanghai is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Guilin Seamild Foods and Shanghai Sanyou Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Sanyou Medical and Guilin Seamild 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 Guilin Seamild Foods are associated (or correlated) with Shanghai Sanyou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Sanyou Medical has no effect on the direction of Guilin Seamild i.e., Guilin Seamild and Shanghai Sanyou go up and down completely randomly.

Pair Corralation between Guilin Seamild and Shanghai Sanyou

Assuming the 90 days trading horizon Guilin Seamild Foods is expected to generate 0.9 times more return on investment than Shanghai Sanyou. However, Guilin Seamild Foods is 1.11 times less risky than Shanghai Sanyou. It trades about 0.03 of its potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about 0.0 per unit of risk. If you would invest  1,467  in Guilin Seamild Foods on September 30, 2024 and sell it today you would earn a total of  191.00  from holding Guilin Seamild Foods or generate 13.02% return on investment over 90 days.

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

Guilin Seamild Foods  vs.  Shanghai Sanyou Medical

Guilin Seamild Foods

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guilin Seamild Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guilin Seamild sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Sanyou Medical

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Guilin Seamild and Shanghai Sanyou

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

The idea behind Guilin Seamild Foods and Shanghai Sanyou Medical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.