Correlation Between Shandong Sanyuan and Dr Peng

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

Diversification Opportunities for Shandong Sanyuan and Dr Peng

-0.46

Correlation Coefficient

Shandong Sanyuan  Dr Peng

Very good diversification

The 3 months correlation between Shandong and 600804 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and Dr Peng Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Peng Telecom 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 Dr Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Peng Telecom has no effect on the direction of Shandong Sanyuan i.e., Shandong Sanyuan and Dr Peng go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and Dr Peng

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to generate 0.42 times more return on investment than Dr Peng. However, Shandong Sanyuan Biotechnology is 2.37 times less risky than Dr Peng. It trades about -0.03 of its potential returns per unit of risk. Dr Peng Telecom is currently generating about -0.02 per unit of risk. If you would invest  2,763  in Shandong Sanyuan Biotechnology on December 26, 2024 and sell it today you would lose (88.00) from holding Shandong Sanyuan Biotechnology or give up 3.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shandong Sanyuan Biotechnology  vs.  Dr Peng Telecom

Shandong Sanyuan Bio

Risk-Adjusted Performance

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 somewhat strong basic indicators, Shandong Sanyuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dr Peng Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Peng Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dr Peng 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 Dr Peng

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

The idea behind Shandong Sanyuan Biotechnology and Dr Peng Telecom 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.