Correlation Between Sheng Yu and ThinTech Materials

Can any of the company-specific risk be diversified away by investing in both Sheng Yu and ThinTech Materials 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 ThinTech Materials 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 ThinTech Materials Technology, you can compare the effects of market volatilities on Sheng Yu and ThinTech Materials 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 ThinTech Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sheng Yu and ThinTech Materials.

Diversification Opportunities for Sheng Yu and ThinTech Materials

0.82

Correlation Coefficient

Sheng Yu  ThinTech Materials

Very poor diversification

The 3 months correlation between Sheng and ThinTech is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sheng Yu Steel and ThinTech Materials Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ThinTech Materials 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 ThinTech Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ThinTech Materials has no effect on the direction of Sheng Yu i.e., Sheng Yu and ThinTech Materials go up and down completely randomly.

Pair Corralation between Sheng Yu and ThinTech Materials

Assuming the 90 days trading horizon Sheng Yu Steel is expected to generate 0.19 times more return on investment than ThinTech Materials. However, Sheng Yu Steel is 5.15 times less risky than ThinTech Materials. It trades about -0.34 of its potential returns per unit of risk. ThinTech Materials Technology is currently generating about -0.09 per unit of risk. If you would invest  2,485  in Sheng Yu Steel on October 11, 2024 and sell it today you would lose (110.00) from holding Sheng Yu Steel or give up 4.43% of portfolio value over 90 days.

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

Sheng Yu Steel  vs.  ThinTech Materials 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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ThinTech Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThinTech Materials Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sheng Yu and ThinTech Materials

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

The idea behind Sheng Yu Steel and ThinTech Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.