Correlation Between Vats Liquor and Sublime China

Can any of the company-specific risk be diversified away by investing in both Vats Liquor and Sublime China 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 Sublime China 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 Sublime China Information, you can compare the effects of market volatilities on Vats Liquor and Sublime China 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 Sublime China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Sublime China.

Diversification Opportunities for Vats Liquor and Sublime China

0.22

Correlation Coefficient

Vats Liquor  Sublime China

Modest diversification

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

Pair Corralation between Vats Liquor and Sublime China

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Sublime China. But the stock apears to be less risky and, when comparing its historical volatility, Vats Liquor Chain is 1.45 times less risky than Sublime China. The stock trades about 0.0 of its potential returns per unit of risk. The Sublime China Information is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,551  in Sublime China Information on December 24, 2024 and sell it today you would earn a total of  1,749  from holding Sublime China Information or generate 31.51% return on investment over 90 days.

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

Vats Liquor Chain  vs.  Sublime China Information

Vats Liquor Chain

Risk-Adjusted Performance

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 somewhat strong basic indicators, Vats Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sublime China Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sublime China Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sublime China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vats Liquor and Sublime China

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

The idea behind Vats Liquor Chain and Sublime China Information 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.