Correlation Between S Tech and Grand Plastic

Can any of the company-specific risk be diversified away by investing in both S Tech and Grand Plastic 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 S Tech and Grand Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between S Tech Corp and Grand Plastic Technology, you can compare the effects of market volatilities on S Tech and Grand Plastic 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 S Tech with a short position of Grand Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of S Tech and Grand Plastic.

Diversification Opportunities for S Tech and Grand Plastic

0.52

Correlation Coefficient

S Tech  Grand Plastic

Very weak diversification

The 3 months correlation between 1584 and Grand is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding S Tech Corp and Grand Plastic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Plastic Technology and S Tech 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 S Tech Corp are associated (or correlated) with Grand Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Plastic Technology has no effect on the direction of S Tech i.e., S Tech and Grand Plastic go up and down completely randomly.

Pair Corralation between S Tech and Grand Plastic

Assuming the 90 days trading horizon S Tech Corp is expected to generate 0.48 times more return on investment than Grand Plastic. However, S Tech Corp is 2.07 times less risky than Grand Plastic. It trades about -0.07 of its potential returns per unit of risk. Grand Plastic Technology is currently generating about -0.04 per unit of risk. If you would invest  2,760  in S Tech Corp on October 23, 2024 and sell it today you would lose (90.00) from holding S Tech Corp or give up 3.26% of portfolio value over 90 days.

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

S Tech Corp  vs.  Grand Plastic Technology

S Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days S Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Grand Plastic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Plastic Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grand Plastic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with S Tech and Grand Plastic

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

The idea behind S Tech Corp and Grand Plastic Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.