Correlation Between Sublime China and Focus Media

Can any of the company-specific risk be diversified away by investing in both Sublime China and Focus Media 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 Sublime China and Focus Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sublime China Information and Focus Media Information, you can compare the effects of market volatilities on Sublime China and Focus Media 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 Sublime China with a short position of Focus Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sublime China and Focus Media.

Diversification Opportunities for Sublime China and Focus Media

0.24

Correlation Coefficient

Sublime China  Focus Media

Modest diversification

The 3 months correlation between Sublime and Focus is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sublime China Information and Focus Media Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Media Information and Sublime China 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 Sublime China Information are associated (or correlated) with Focus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Media Information has no effect on the direction of Sublime China i.e., Sublime China and Focus Media go up and down completely randomly.

Pair Corralation between Sublime China and Focus Media

Assuming the 90 days trading horizon Sublime China Information is expected to under-perform the Focus Media. In addition to that, Sublime China is 2.82 times more volatile than Focus Media Information. It trades about -0.05 of its total potential returns per unit of risk. Focus Media Information is currently generating about -0.08 per unit of volatility. If you would invest  688.00  in Focus Media Information on October 8, 2024 and sell it today you would lose (19.00) from holding Focus Media Information or give up 2.76% of portfolio value over 90 days.

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

Sublime China Information  vs.  Focus Media Information

Sublime China Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sublime China Information 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.

Focus Media Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Media Information 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.

Pair Trading with Sublime China and Focus Media

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

The idea behind Sublime China Information and Focus Media Information 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.