Correlation Between Sanbo Hospital and Tianshan Aluminum

Can any of the company-specific risk be diversified away by investing in both Sanbo Hospital and Tianshan Aluminum 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 Sanbo Hospital and Tianshan Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanbo Hospital Management and Tianshan Aluminum Group, you can compare the effects of market volatilities on Sanbo Hospital and Tianshan Aluminum 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 Sanbo Hospital with a short position of Tianshan Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanbo Hospital and Tianshan Aluminum.

Diversification Opportunities for Sanbo Hospital and Tianshan Aluminum

0.76

Correlation Coefficient

Sanbo Hospital  Tianshan Aluminum

Poor diversification

The 3 months correlation between Sanbo and Tianshan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sanbo Hospital Management and Tianshan Aluminum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshan Aluminum and Sanbo Hospital 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 Sanbo Hospital Management are associated (or correlated) with Tianshan Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshan Aluminum has no effect on the direction of Sanbo Hospital i.e., Sanbo Hospital and Tianshan Aluminum go up and down completely randomly.

Pair Corralation between Sanbo Hospital and Tianshan Aluminum

Assuming the 90 days trading horizon Sanbo Hospital Management is expected to under-perform the Tianshan Aluminum. In addition to that, Sanbo Hospital is 1.57 times more volatile than Tianshan Aluminum Group. It trades about -0.02 of its total potential returns per unit of risk. Tianshan Aluminum Group is currently generating about 0.04 per unit of volatility. If you would invest  604.00  in Tianshan Aluminum Group on October 3, 2024 and sell it today you would earn a total of  183.00  from holding Tianshan Aluminum Group or generate 30.3% return on investment over 90 days.

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

Sanbo Hospital Management  vs.  Tianshan Aluminum Group

Sanbo Hospital Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tianshan Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sanbo Hospital and Tianshan Aluminum

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

The idea behind Sanbo Hospital Management and Tianshan Aluminum Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.