Correlation Between Shan Loong and United Orthopedic

Can any of the company-specific risk be diversified away by investing in both Shan Loong and United Orthopedic 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 Shan Loong and United Orthopedic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shan Loong Transportation Co and United Orthopedic, you can compare the effects of market volatilities on Shan Loong and United Orthopedic 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 Shan Loong with a short position of United Orthopedic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Loong and United Orthopedic.

Diversification Opportunities for Shan Loong and United Orthopedic

0.94

Correlation Coefficient

Shan Loong  United Orthopedic

Almost no diversification

The 3 months correlation between Shan and United is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and United Orthopedic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Orthopedic and Shan Loong 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 Shan Loong Transportation Co are associated (or correlated) with United Orthopedic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Orthopedic has no effect on the direction of Shan Loong i.e., Shan Loong and United Orthopedic go up and down completely randomly.

Pair Corralation between Shan Loong and United Orthopedic

Assuming the 90 days trading horizon Shan Loong Transportation Co is expected to under-perform the United Orthopedic. But the stock apears to be less risky and, when comparing its historical volatility, Shan Loong Transportation Co is 1.46 times less risky than United Orthopedic. The stock trades about -0.18 of its potential returns per unit of risk. The United Orthopedic is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,656  in United Orthopedic on October 24, 2024 and sell it today you would lose (436.00) from holding United Orthopedic or give up 4.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.59%
Values	Daily Returns

Shan Loong Transportation Co  vs.  United Orthopedic

Shan Loong Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shan Loong Transportation Co 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.

United Orthopedic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Orthopedic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, United Orthopedic 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 Shan Loong and United Orthopedic

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

The idea behind Shan Loong Transportation Co and United Orthopedic 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.