Correlation Between Shandong Sanyuan and China Sports

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

Diversification Opportunities for Shandong Sanyuan and China Sports

0.53

Correlation Coefficient

Shandong Sanyuan  China Sports

Very weak diversification

The 3 months correlation between Shandong and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry 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 China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and China Sports go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and China Sports

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the China Sports. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sanyuan Biotechnology is 1.44 times less risky than China Sports. The stock trades about -0.13 of its potential returns per unit of risk. The China Sports Industry is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  859.00  in China Sports Industry on October 3, 2024 and sell it today you would lose (32.00) from holding China Sports Industry or give up 3.73% 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.  China Sports Industry

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.

China Sports Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Sports Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shandong Sanyuan and China Sports

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

The idea behind Shandong Sanyuan Biotechnology and China Sports Industry 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.