Correlation Between Sichuan Newsnet and Shandong Homey

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

By analyzing existing cross correlation between Sichuan Newsnet Media and Shandong Homey Aquatic, you can compare the effects of market volatilities on Sichuan Newsnet and Shandong Homey 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 Sichuan Newsnet with a short position of Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Newsnet and Shandong Homey.

Diversification Opportunities for Sichuan Newsnet and Shandong Homey

0.41

Correlation Coefficient

Sichuan Newsnet  Shandong Homey

Very weak diversification

The 3 months correlation between Sichuan and Shandong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Newsnet Media and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic and Sichuan Newsnet 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 Sichuan Newsnet Media are associated (or correlated) with Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Sichuan Newsnet i.e., Sichuan Newsnet and Shandong Homey go up and down completely randomly.

Pair Corralation between Sichuan Newsnet and Shandong Homey

Assuming the 90 days trading horizon Sichuan Newsnet Media is expected to under-perform the Shandong Homey. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Newsnet Media is 1.03 times less risky than Shandong Homey. The stock trades about -0.05 of its potential returns per unit of risk. The Shandong Homey Aquatic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  207.00  in Shandong Homey Aquatic on October 4, 2024 and sell it today you would earn a total of  29.00  from holding Shandong Homey Aquatic or generate 14.01% return on investment over 90 days.

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

Sichuan Newsnet Media  vs.  Shandong Homey Aquatic

Sichuan Newsnet Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Newsnet Media 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.

Shandong Homey Aquatic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Homey Aquatic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Homey sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Newsnet and Shandong Homey

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

The idea behind Sichuan Newsnet Media and Shandong Homey Aquatic 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.