Correlation Between Shantou Wanshun and Daoming OpticsChemical

Can any of the company-specific risk be diversified away by investing in both Shantou Wanshun and Daoming OpticsChemical 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 Shantou Wanshun and Daoming OpticsChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shantou Wanshun Package and Daoming OpticsChemical Co, you can compare the effects of market volatilities on Shantou Wanshun and Daoming OpticsChemical 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 Shantou Wanshun with a short position of Daoming OpticsChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Daoming OpticsChemical.

Diversification Opportunities for Shantou Wanshun and Daoming OpticsChemical

0.75

Correlation Coefficient

Shantou Wanshun  Daoming OpticsChemical

Poor diversification

The 3 months correlation between Shantou and Daoming is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Daoming OpticsChemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daoming OpticsChemical and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Daoming OpticsChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daoming OpticsChemical has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Daoming OpticsChemical go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Daoming OpticsChemical

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to generate 1.29 times more return on investment than Daoming OpticsChemical. However, Shantou Wanshun is 1.29 times more volatile than Daoming OpticsChemical Co. It trades about 0.04 of its potential returns per unit of risk. Daoming OpticsChemical Co is currently generating about -0.01 per unit of risk. If you would invest  493.00  in Shantou Wanshun Package on December 26, 2024 and sell it today you would earn a total of  29.00  from holding Shantou Wanshun Package or generate 5.88% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Daoming OpticsChemical Co

Shantou Wanshun Package

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shantou Wanshun Package are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantou Wanshun may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Daoming OpticsChemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daoming OpticsChemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daoming OpticsChemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shantou Wanshun and Daoming OpticsChemical

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

The idea behind Shantou Wanshun Package and Daoming OpticsChemical Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..