Correlation Between Shandong Sanyuan and Xiamen CD

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

Diversification Opportunities for Shandong Sanyuan and Xiamen CD

-0.04

Correlation Coefficient

Shandong Sanyuan  Xiamen CD

Good diversification

The 3 months correlation between Shandong and Xiamen is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Xiamen CD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen CD 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 Xiamen CD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen CD has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Xiamen CD go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Xiamen CD

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the Xiamen CD. In addition to that, Shandong Sanyuan is 1.52 times more volatile than Xiamen CD. It trades about -0.23 of its total potential returns per unit of risk. Xiamen CD is currently generating about 0.01 per unit of volatility. If you would invest  998.00  in Xiamen CD on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Xiamen CD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Shandong Sanyuan Biotechnology  vs.  Xiamen CD

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 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.

Xiamen CD

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Xiamen CD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Xiamen CD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shandong Sanyuan and Xiamen CD

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

The idea behind Shandong Sanyuan Biotechnology and Xiamen CD 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.