Correlation Between Shenmao Technology and FineMat Applied

Can any of the company-specific risk be diversified away by investing in both Shenmao Technology and FineMat Applied 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 Shenmao Technology and FineMat Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenmao Technology and FineMat Applied Materials, you can compare the effects of market volatilities on Shenmao Technology and FineMat Applied 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 Shenmao Technology with a short position of FineMat Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenmao Technology and FineMat Applied.

Diversification Opportunities for Shenmao Technology and FineMat Applied

0.61

Correlation Coefficient

Shenmao Technology  FineMat Applied

Poor diversification

The 3 months correlation between Shenmao and FineMat is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shenmao Technology and FineMat Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FineMat Applied Materials and Shenmao Technology 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 Shenmao Technology are associated (or correlated) with FineMat Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FineMat Applied Materials has no effect on the direction of Shenmao Technology i.e., Shenmao Technology and FineMat Applied go up and down completely randomly.

Pair Corralation between Shenmao Technology and FineMat Applied

Assuming the 90 days trading horizon Shenmao Technology is expected to under-perform the FineMat Applied. But the stock apears to be less risky and, when comparing its historical volatility, Shenmao Technology is 1.84 times less risky than FineMat Applied. The stock trades about -0.07 of its potential returns per unit of risk. The FineMat Applied Materials is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,755  in FineMat Applied Materials on October 11, 2024 and sell it today you would lose (15.00) from holding FineMat Applied Materials or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Shenmao Technology  vs.  FineMat Applied Materials

Shenmao Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenmao Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shenmao Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FineMat Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FineMat Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Shenmao Technology and FineMat Applied

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

The idea behind Shenmao Technology and FineMat Applied 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.