Correlation Between Vats Liquor and Shanghai Shuixing

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

Diversification Opportunities for Vats Liquor and Shanghai Shuixing

0.25

Correlation Coefficient

Vats Liquor  Shanghai Shuixing

Modest diversification

The 3 months correlation between Vats and Shanghai is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Shanghai Shuixing Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shuixing Home 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 Shanghai Shuixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shuixing Home has no effect on the direction of Vats Liquor i.e., Vats Liquor and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Vats Liquor and Shanghai Shuixing

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the Shanghai Shuixing. In addition to that, Vats Liquor is 1.21 times more volatile than Shanghai Shuixing Home. It trades about 0.0 of its total potential returns per unit of risk. Shanghai Shuixing Home is currently generating about 0.16 per unit of volatility. If you would invest  1,315  in Shanghai Shuixing Home on October 9, 2024 and sell it today you would earn a total of  442.00  from holding Shanghai Shuixing Home or generate 33.61% 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.  Shanghai Shuixing Home

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 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.

Shanghai Shuixing Home

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Shuixing Home are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Shuixing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vats Liquor and Shanghai Shuixing

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

The idea behind Vats Liquor Chain and Shanghai Shuixing Home 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.