Correlation Between San Fu and Great Computer

Can any of the company-specific risk be diversified away by investing in both San Fu and Great Computer 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 San Fu and Great Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Fu Chemical and Great Computer, you can compare the effects of market volatilities on San Fu and Great Computer 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 San Fu with a short position of Great Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fu and Great Computer.

Diversification Opportunities for San Fu and Great Computer

-0.35

Correlation Coefficient

San Fu  Great Computer

Very good diversification

The 3 months correlation between San and Great is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding San Fu Chemical and Great Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Computer and San Fu 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 San Fu Chemical are associated (or correlated) with Great Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Computer has no effect on the direction of San Fu i.e., San Fu and Great Computer go up and down completely randomly.

Pair Corralation between San Fu and Great Computer

Assuming the 90 days trading horizon San Fu is expected to generate 142.24 times less return on investment than Great Computer. But when comparing it to its historical volatility, San Fu Chemical is 20.86 times less risky than Great Computer. It trades about 0.01 of its potential returns per unit of risk. Great Computer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Great Computer on October 25, 2024 and sell it today you would earn a total of  605.00  from holding Great Computer or generate 50.84% return on investment over 90 days.

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

San Fu Chemical  vs.  Great Computer

San Fu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Great Computer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with San Fu and Great Computer

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

The idea behind San Fu Chemical and Great Computer 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.