Correlation Between Vats Liquor and Sichuan Chuantou

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

Diversification Opportunities for Vats Liquor and Sichuan Chuantou

-0.17

Correlation Coefficient

Vats Liquor  Sichuan Chuantou

Good diversification

The 3 months correlation between Vats and Sichuan is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Sichuan Chuantou Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Chuantou Energy 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 Sichuan Chuantou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Chuantou Energy has no effect on the direction of Vats Liquor i.e., Vats Liquor and Sichuan Chuantou go up and down completely randomly.

Pair Corralation between Vats Liquor and Sichuan Chuantou

Assuming the 90 days trading horizon Vats Liquor is expected to generate 7.76 times less return on investment than Sichuan Chuantou. In addition to that, Vats Liquor is 2.33 times more volatile than Sichuan Chuantou Energy. It trades about 0.0 of its total potential returns per unit of risk. Sichuan Chuantou Energy is currently generating about 0.03 per unit of volatility. If you would invest  1,492  in Sichuan Chuantou Energy on October 5, 2024 and sell it today you would earn a total of  163.00  from holding Sichuan Chuantou Energy or generate 10.92% return on investment over 90 days.

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

Vats Liquor Chain  vs.  Sichuan Chuantou Energy

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 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.

Sichuan Chuantou Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Chuantou Energy 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 Vats Liquor and Sichuan Chuantou

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

The idea behind Vats Liquor Chain and Sichuan Chuantou Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.