Correlation Between Chongqing Sulian and Sinosteel Luonai

Can any of the company-specific risk be diversified away by investing in both Chongqing Sulian and Sinosteel Luonai 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 Chongqing Sulian and Sinosteel Luonai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Sulian Plastic and Sinosteel Luonai Materials, you can compare the effects of market volatilities on Chongqing Sulian and Sinosteel Luonai 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 Chongqing Sulian with a short position of Sinosteel Luonai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Sulian and Sinosteel Luonai.

Diversification Opportunities for Chongqing Sulian and Sinosteel Luonai

-0.05

Correlation Coefficient

Chongqing Sulian  Sinosteel Luonai

Good diversification

The 3 months correlation between Chongqing and Sinosteel is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Sulian Plastic and Sinosteel Luonai Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Luonai Mat and Chongqing Sulian 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 Chongqing Sulian Plastic are associated (or correlated) with Sinosteel Luonai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Luonai Mat has no effect on the direction of Chongqing Sulian i.e., Chongqing Sulian and Sinosteel Luonai go up and down completely randomly.

Pair Corralation between Chongqing Sulian and Sinosteel Luonai

Assuming the 90 days trading horizon Chongqing Sulian Plastic is expected to generate 3.39 times more return on investment than Sinosteel Luonai. However, Chongqing Sulian is 3.39 times more volatile than Sinosteel Luonai Materials. It trades about 0.13 of its potential returns per unit of risk. Sinosteel Luonai Materials is currently generating about -0.12 per unit of risk. If you would invest  2,810  in Chongqing Sulian Plastic on December 4, 2024 and sell it today you would earn a total of  980.00  from holding Chongqing Sulian Plastic or generate 34.88% return on investment over 90 days.

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

Chongqing Sulian Plastic  vs.  Sinosteel Luonai Materials

Chongqing Sulian Plastic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Sulian Plastic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Sulian sustained solid returns over the last few months and may actually be approaching a breakup point.

Sinosteel Luonai Mat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinosteel Luonai Materials 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 Chongqing Sulian and Sinosteel Luonai

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

The idea behind Chongqing Sulian Plastic and Sinosteel Luonai Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.