Correlation Between Shandong Sanyuan and Kangxin New

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

By analyzing existing cross correlation between Shandong Sanyuan Biotechnology and Kangxin New Materials, you can compare the effects of market volatilities on Shandong Sanyuan and Kangxin New 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 Shandong Sanyuan with a short position of Kangxin New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Sanyuan and Kangxin New.

Diversification Opportunities for Shandong Sanyuan and Kangxin New

0.54

Correlation Coefficient

Shandong Sanyuan  Kangxin New

Very weak diversification

The 3 months correlation between Shandong and Kangxin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Kangxin New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangxin New Materials and Shandong Sanyuan 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 Shandong Sanyuan Biotechnology are associated (or correlated) with Kangxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangxin New Materials has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Kangxin New go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Kangxin New

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the Kangxin New. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sanyuan Biotechnology is 1.38 times less risky than Kangxin New. The stock trades about -0.02 of its potential returns per unit of risk. The Kangxin New Materials is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  294.00  in Kangxin New Materials on October 4, 2024 and sell it today you would lose (86.00) from holding Kangxin New Materials or give up 29.25% of portfolio value over 90 days.

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

Shandong Sanyuan Biotechnology  vs.  Kangxin New Materials

Shandong Sanyuan Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Sanyuan Biotechnology 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.

Kangxin New Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kangxin New may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shandong Sanyuan and Kangxin New

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

The idea behind Shandong Sanyuan Biotechnology and Kangxin New Materials 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.