Correlation Between Shandong Sanyuan and Fiberhome Telecommunicatio

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

Diversification Opportunities for Shandong Sanyuan and Fiberhome Telecommunicatio

0.42

Correlation Coefficient

Shandong Sanyuan  Fiberhome Telecommunicatio

Very weak diversification

The 3 months correlation between Shandong and Fiberhome is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the Fiberhome Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sanyuan Biotechnology is 1.2 times less risky than Fiberhome Telecommunicatio. The stock trades about -0.14 of its potential returns per unit of risk. The Fiberhome Telecommunication Technologies is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,851  in Fiberhome Telecommunication Technologies on October 8, 2024 and sell it today you would lose (126.00) from holding Fiberhome Telecommunication Technologies or give up 6.81% 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.  Fiberhome Telecommunication Te

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.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiberhome Telecommunication Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio

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

The idea behind Shandong Sanyuan Biotechnology and Fiberhome Telecommunication Technologies 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.