Correlation Between Guangdong Transtek and Sinotrans

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

By analyzing existing cross correlation between Guangdong Transtek Medical and Sinotrans Ltd Class, you can compare the effects of market volatilities on Guangdong Transtek and Sinotrans 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 Guangdong Transtek with a short position of Sinotrans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Transtek and Sinotrans.

Diversification Opportunities for Guangdong Transtek and Sinotrans

-0.22

Correlation Coefficient

Guangdong Transtek  Sinotrans

Very good diversification

The 3 months correlation between Guangdong and Sinotrans is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Transtek Medical and Sinotrans Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Class and Guangdong Transtek 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 Guangdong Transtek Medical are associated (or correlated) with Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Class has no effect on the direction of Guangdong Transtek i.e., Guangdong Transtek and Sinotrans go up and down completely randomly.

Pair Corralation between Guangdong Transtek and Sinotrans

Assuming the 90 days trading horizon Guangdong Transtek Medical is expected to under-perform the Sinotrans. In addition to that, Guangdong Transtek is 3.76 times more volatile than Sinotrans Ltd Class. It trades about -0.03 of its total potential returns per unit of risk. Sinotrans Ltd Class is currently generating about -0.03 per unit of volatility. If you would invest  538.00  in Sinotrans Ltd Class on December 27, 2024 and sell it today you would lose (10.00) from holding Sinotrans Ltd Class or give up 1.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Guangdong Transtek Medical  vs.  Sinotrans Ltd Class

Guangdong Transtek

Risk-Adjusted Performance

Very Weak

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

Sinotrans Class

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Guangdong Transtek and Sinotrans

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

The idea behind Guangdong Transtek Medical and Sinotrans Ltd Class 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.