Correlation Between Sheng Yu and Promise Technology

Can any of the company-specific risk be diversified away by investing in both Sheng Yu and Promise Technology 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 Sheng Yu and Promise Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sheng Yu Steel and Promise Technology, you can compare the effects of market volatilities on Sheng Yu and Promise Technology 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 Sheng Yu with a short position of Promise Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sheng Yu and Promise Technology.

Diversification Opportunities for Sheng Yu and Promise Technology

0.68

Correlation Coefficient

Sheng Yu  Promise Technology

Poor diversification

The 3 months correlation between Sheng and Promise is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sheng Yu Steel and Promise Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promise Technology and Sheng Yu 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 Sheng Yu Steel are associated (or correlated) with Promise Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promise Technology has no effect on the direction of Sheng Yu i.e., Sheng Yu and Promise Technology go up and down completely randomly.

Pair Corralation between Sheng Yu and Promise Technology

Assuming the 90 days trading horizon Sheng Yu Steel is expected to generate 0.74 times more return on investment than Promise Technology. However, Sheng Yu Steel is 1.35 times less risky than Promise Technology. It trades about -0.01 of its potential returns per unit of risk. Promise Technology is currently generating about -0.05 per unit of risk. If you would invest  2,480  in Sheng Yu Steel on September 15, 2024 and sell it today you would lose (15.00) from holding Sheng Yu Steel or give up 0.6% of portfolio value over 90 days.

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

Sheng Yu Steel  vs.  Promise Technology

Sheng Yu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Promise Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promise Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Promise Technology 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 Sheng Yu and Promise Technology

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

The idea behind Sheng Yu Steel and Promise 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..