Correlation Between Sinomach Automobile and Zhejiang Tailin

Can any of the company-specific risk be diversified away by investing in both Sinomach Automobile and Zhejiang Tailin 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 Sinomach Automobile and Zhejiang Tailin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinomach Automobile Co and Zhejiang Tailin Bioengineering, you can compare the effects of market volatilities on Sinomach Automobile and Zhejiang Tailin 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 Sinomach Automobile with a short position of Zhejiang Tailin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomach Automobile and Zhejiang Tailin.

Diversification Opportunities for Sinomach Automobile and Zhejiang Tailin

0.67

Correlation Coefficient

Sinomach Automobile  Zhejiang Tailin

Poor diversification

The 3 months correlation between Sinomach and Zhejiang is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach Automobile Co and Zhejiang Tailin Bioengineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Tailin Bioe and Sinomach Automobile 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 Sinomach Automobile Co are associated (or correlated) with Zhejiang Tailin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Tailin Bioe has no effect on the direction of Sinomach Automobile i.e., Sinomach Automobile and Zhejiang Tailin go up and down completely randomly.

Pair Corralation between Sinomach Automobile and Zhejiang Tailin

Assuming the 90 days trading horizon Sinomach Automobile Co is expected to generate 1.52 times more return on investment than Zhejiang Tailin. However, Sinomach Automobile is 1.52 times more volatile than Zhejiang Tailin Bioengineering. It trades about 0.0 of its potential returns per unit of risk. Zhejiang Tailin Bioengineering is currently generating about -0.36 per unit of risk. If you would invest  662.00  in Sinomach Automobile Co on September 25, 2024 and sell it today you would lose (5.00) from holding Sinomach Automobile Co or give up 0.76% of portfolio value over 90 days.

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

Sinomach Automobile Co  vs.  Zhejiang Tailin Bioengineering

Sinomach Automobile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach Automobile Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Tailin Bioe

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Tailin Bioengineering are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Tailin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinomach Automobile and Zhejiang Tailin

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

The idea behind Sinomach Automobile Co and Zhejiang Tailin Bioengineering 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.