Correlation Between SI TECH and Guangdong Marubi

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

By analyzing existing cross correlation between SI TECH Information Technology and Guangdong Marubi Biotechnology, you can compare the effects of market volatilities on SI TECH and Guangdong Marubi 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 SI TECH with a short position of Guangdong Marubi. Check out your portfolio center. Please also check ongoing floating volatility patterns of SI TECH and Guangdong Marubi.

Diversification Opportunities for SI TECH and Guangdong Marubi

0.47

Correlation Coefficient

SI TECH  Guangdong Marubi

Very weak diversification

The 3 months correlation between 300608 and Guangdong is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SI TECH Information Technology and Guangdong Marubi Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Marubi Bio and SI TECH 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 SI TECH Information Technology are associated (or correlated) with Guangdong Marubi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Marubi Bio has no effect on the direction of SI TECH i.e., SI TECH and Guangdong Marubi go up and down completely randomly.

Pair Corralation between SI TECH and Guangdong Marubi

Assuming the 90 days trading horizon SI TECH Information Technology is expected to under-perform the Guangdong Marubi. In addition to that, SI TECH is 1.73 times more volatile than Guangdong Marubi Biotechnology. It trades about -0.03 of its total potential returns per unit of risk. Guangdong Marubi Biotechnology is currently generating about 0.1 per unit of volatility. If you would invest  2,881  in Guangdong Marubi Biotechnology on September 29, 2024 and sell it today you would earn a total of  501.00  from holding Guangdong Marubi Biotechnology or generate 17.39% return on investment over 90 days.

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

SI TECH Information Technology  vs.  Guangdong Marubi Biotechnology

SI TECH Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SI TECH Information Technology 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.

Guangdong Marubi Bio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SI TECH and Guangdong Marubi

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

The idea behind SI TECH Information Technology and Guangdong Marubi Biotechnology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.