Correlation Between Masterwork Machinery and Shanghai Sanyou

Can any of the company-specific risk be diversified away by investing in both Masterwork Machinery and Shanghai Sanyou 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 Masterwork Machinery and Shanghai Sanyou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Masterwork Machinery and Shanghai Sanyou Medical, you can compare the effects of market volatilities on Masterwork Machinery and Shanghai Sanyou 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 Masterwork Machinery with a short position of Shanghai Sanyou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterwork Machinery and Shanghai Sanyou.

Diversification Opportunities for Masterwork Machinery and Shanghai Sanyou

-0.47

Correlation Coefficient

Masterwork Machinery  Shanghai Sanyou

Very good diversification

The 3 months correlation between Masterwork and Shanghai is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Shanghai Sanyou Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Sanyou Medical and Masterwork Machinery 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 Masterwork Machinery are associated (or correlated) with Shanghai Sanyou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Sanyou Medical has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Shanghai Sanyou go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Shanghai Sanyou

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 1.68 times more return on investment than Shanghai Sanyou. However, Masterwork Machinery is 1.68 times more volatile than Shanghai Sanyou Medical. It trades about 0.08 of its potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about -0.08 per unit of risk. If you would invest  581.00  in Masterwork Machinery on December 28, 2024 and sell it today you would earn a total of  79.00  from holding Masterwork Machinery or generate 13.6% return on investment over 90 days.

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

Masterwork Machinery  vs.  Shanghai Sanyou Medical

Masterwork Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Sanyou Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Sanyou Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Masterwork Machinery and Shanghai Sanyou

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

The idea behind Masterwork Machinery and Shanghai Sanyou Medical 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.