Correlation Between Shantou Wanshun and Sinomine Resource

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

Diversification Opportunities for Shantou Wanshun and Sinomine Resource

0.64

Correlation Coefficient

Shantou Wanshun  Sinomine Resource

Poor diversification

The 3 months correlation between Shantou and Sinomine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Sinomine Resource Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomine Resource 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 Sinomine Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomine Resource has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Sinomine Resource go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Sinomine Resource

Assuming the 90 days trading horizon Shantou Wanshun is expected to generate 1.23 times less return on investment than Sinomine Resource. In addition to that, Shantou Wanshun is 1.18 times more volatile than Sinomine Resource Exploration. It trades about 0.07 of its total potential returns per unit of risk. Sinomine Resource Exploration is currently generating about 0.09 per unit of volatility. If you would invest  2,700  in Sinomine Resource Exploration on September 29, 2024 and sell it today you would earn a total of  970.00  from holding Sinomine Resource Exploration or generate 35.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Shantou Wanshun Package  vs.  Sinomine Resource Exploration

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinomine Resource

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomine Resource Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinomine Resource 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 Sinomine Resource

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

The idea behind Shantou Wanshun Package and Sinomine Resource Exploration 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..