Correlation Between Vats Liquor and Shenzhen Sunway

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

By analyzing existing cross correlation between Vats Liquor Chain and Shenzhen Sunway Communication, you can compare the effects of market volatilities on Vats Liquor and Shenzhen Sunway 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 Vats Liquor with a short position of Shenzhen Sunway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Shenzhen Sunway.

Diversification Opportunities for Vats Liquor and Shenzhen Sunway

0.65

Correlation Coefficient

Vats Liquor  Shenzhen Sunway

Poor diversification

The 3 months correlation between Vats and Shenzhen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Shenzhen Sunway Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunway Comm and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Shenzhen Sunway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunway Comm has no effect on the direction of Vats Liquor i.e., Vats Liquor and Shenzhen Sunway go up and down completely randomly.

Pair Corralation between Vats Liquor and Shenzhen Sunway

Assuming the 90 days trading horizon Vats Liquor Chain is expected to generate 1.32 times more return on investment than Shenzhen Sunway. However, Vats Liquor is 1.32 times more volatile than Shenzhen Sunway Communication. It trades about -0.11 of its potential returns per unit of risk. Shenzhen Sunway Communication is currently generating about -0.19 per unit of risk. If you would invest  1,777  in Vats Liquor Chain on October 8, 2024 and sell it today you would lose (161.00) from holding Vats Liquor Chain or give up 9.06% of portfolio value over 90 days.

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

Vats Liquor Chain  vs.  Shenzhen Sunway Communication

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenzhen Sunway Comm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Sunway Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vats Liquor and Shenzhen Sunway

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

The idea behind Vats Liquor Chain and Shenzhen Sunway Communication 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.