Correlation Between Sinomach Automobile and Hangzhou Arcvideo

Can any of the company-specific risk be diversified away by investing in both Sinomach Automobile and Hangzhou Arcvideo 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 Hangzhou Arcvideo 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 Hangzhou Arcvideo Technology, you can compare the effects of market volatilities on Sinomach Automobile and Hangzhou Arcvideo 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 Hangzhou Arcvideo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomach Automobile and Hangzhou Arcvideo.

Diversification Opportunities for Sinomach Automobile and Hangzhou Arcvideo

0.75

Correlation Coefficient

Sinomach Automobile  Hangzhou Arcvideo

Poor diversification

The 3 months correlation between Sinomach and Hangzhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach Automobile Co and Hangzhou Arcvideo Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Arcvideo 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 Hangzhou Arcvideo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Arcvideo has no effect on the direction of Sinomach Automobile i.e., Sinomach Automobile and Hangzhou Arcvideo go up and down completely randomly.

Pair Corralation between Sinomach Automobile and Hangzhou Arcvideo

Assuming the 90 days trading horizon Sinomach Automobile is expected to generate 11.23 times less return on investment than Hangzhou Arcvideo. But when comparing it to its historical volatility, Sinomach Automobile Co is 3.15 times less risky than Hangzhou Arcvideo. It trades about 0.02 of its potential returns per unit of risk. Hangzhou Arcvideo Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,875  in Hangzhou Arcvideo Technology on December 26, 2024 and sell it today you would earn a total of  463.00  from holding Hangzhou Arcvideo Technology or generate 16.1% return on investment over 90 days.

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

Sinomach Automobile Co  vs.  Hangzhou Arcvideo Technology

Sinomach Automobile

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach Automobile Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinomach Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hangzhou Arcvideo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Arcvideo Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Arcvideo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinomach Automobile and Hangzhou Arcvideo

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

The idea behind Sinomach Automobile Co and Hangzhou Arcvideo Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.