Correlation Between Shan Loong and Sporton International

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

Diversification Opportunities for Shan Loong and Sporton International

0.41

Correlation Coefficient

Shan Loong  Sporton International

Very weak diversification

The 3 months correlation between Shan and Sporton is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Shan Loong i.e., Shan Loong and Sporton International go up and down completely randomly.

Pair Corralation between Shan Loong and Sporton International

Assuming the 90 days trading horizon Shan Loong Transportation Co is expected to generate 0.99 times more return on investment than Sporton International. However, Shan Loong Transportation Co is 1.01 times less risky than Sporton International. It trades about -0.03 of its potential returns per unit of risk. Sporton International is currently generating about -0.06 per unit of risk. If you would invest  1,720  in Shan Loong Transportation Co on December 28, 2024 and sell it today you would lose (40.00) from holding Shan Loong Transportation Co or give up 2.33% of portfolio value over 90 days.

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

Shan Loong Transportation Co  vs.  Sporton International

Shan Loong Transport

Risk-Adjusted Performance

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 fairly stable basic indicators, Shan Loong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sporton International

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Shan Loong Transportation Co and Sporton International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.