Correlation Between Sunmax Biotechnology and China Steel

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

By analyzing existing cross correlation between Sunmax Biotechnology Co and China Steel Corp, you can compare the effects of market volatilities on Sunmax Biotechnology and China Steel 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 Sunmax Biotechnology with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunmax Biotechnology and China Steel.

Diversification Opportunities for Sunmax Biotechnology and China Steel

-0.61

Correlation Coefficient

Sunmax Biotechnology  China Steel

Excellent diversification

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

Pair Corralation between Sunmax Biotechnology and China Steel

Assuming the 90 days trading horizon Sunmax Biotechnology Co is expected to generate 2.95 times more return on investment than China Steel. However, Sunmax Biotechnology is 2.95 times more volatile than China Steel Corp. It trades about -0.08 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.39 per unit of risk. If you would invest  28,250  in Sunmax Biotechnology Co on October 6, 2024 and sell it today you would lose (450.00) from holding Sunmax Biotechnology Co or give up 1.59% of portfolio value over 90 days.

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

Sunmax Biotechnology Co  vs.  China Steel Corp

Sunmax Biotechnology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunmax Biotechnology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunmax Biotechnology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, China Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sunmax Biotechnology and China Steel

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

The idea behind Sunmax Biotechnology Co and China Steel Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.