Correlation Between Shengyuan Environmental and Sichuan Jinshi

Can any of the company-specific risk be diversified away by investing in both Shengyuan Environmental and Sichuan Jinshi 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 Shengyuan Environmental and Sichuan Jinshi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shengyuan Environmental Protection and Sichuan Jinshi Technology, you can compare the effects of market volatilities on Shengyuan Environmental and Sichuan Jinshi 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 Shengyuan Environmental with a short position of Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengyuan Environmental and Sichuan Jinshi.

Diversification Opportunities for Shengyuan Environmental and Sichuan Jinshi

0.45

Correlation Coefficient

Shengyuan Environmental  Sichuan Jinshi

Very weak diversification

The 3 months correlation between Shengyuan and Sichuan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shengyuan Environmental Protec and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and Shengyuan Environmental 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 Shengyuan Environmental Protection are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Shengyuan Environmental i.e., Shengyuan Environmental and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Shengyuan Environmental and Sichuan Jinshi

Assuming the 90 days trading horizon Shengyuan Environmental Protection is expected to under-perform the Sichuan Jinshi. But the stock apears to be less risky and, when comparing its historical volatility, Shengyuan Environmental Protection is 1.44 times less risky than Sichuan Jinshi. The stock trades about -0.09 of its potential returns per unit of risk. The Sichuan Jinshi Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  632.00  in Sichuan Jinshi Technology on October 26, 2024 and sell it today you would earn a total of  46.00  from holding Sichuan Jinshi Technology or generate 7.28% return on investment over 90 days.

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

Shengyuan Environmental Protec  vs.  Sichuan Jinshi Technology

Shengyuan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengyuan Environmental Protection 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 Jinshi Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shengyuan Environmental and Sichuan Jinshi

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

The idea behind Shengyuan Environmental Protection and Sichuan Jinshi Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.