Correlation Between Elite Color and Sinomach General

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

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

Diversification Opportunities for Elite Color and Sinomach General

0.82

Correlation Coefficient

Elite Color  Sinomach General

Very poor diversification

The 3 months correlation between Elite and Sinomach is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental 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 Elite Color 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 Elite Color Environmental 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 Elite Color i.e., Elite Color and Sinomach General go up and down completely randomly.

Pair Corralation between Elite Color and Sinomach General

Assuming the 90 days trading horizon Elite Color Environmental is expected to generate 0.92 times more return on investment than Sinomach General. However, Elite Color Environmental is 1.09 times less risky than Sinomach General. It trades about 0.14 of its potential returns per unit of risk. Sinomach General Machinery is currently generating about 0.09 per unit of risk. If you would invest  596.00  in Elite Color Environmental on December 25, 2024 and sell it today you would earn a total of  75.00  from holding Elite Color Environmental or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Elite Color Environmental  vs.  Sinomach General Machinery

Elite Color Environmental

Risk-Adjusted Performance

OK

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

Sinomach General Mac

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach General Machinery are ranked lower than 7 (%) 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 April 2025.

Pair Trading with Elite Color and Sinomach General

The main advantage of trading using opposite Elite Color and Sinomach General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Color 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 Elite Color Environmental 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.