Correlation Between Sinomach General and Chengdu Xingrong

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

By analyzing existing cross correlation between Sinomach General Machinery and Chengdu Xingrong Investment, you can compare the effects of market volatilities on Sinomach General and Chengdu Xingrong 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 General with a short position of Chengdu Xingrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomach General and Chengdu Xingrong.

Diversification Opportunities for Sinomach General and Chengdu Xingrong

-0.1

Correlation Coefficient

Sinomach General  Chengdu Xingrong

Good diversification

The 3 months correlation between Sinomach and Chengdu is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach General Machinery and Chengdu Xingrong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xingrong Inv and Sinomach General 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 General Machinery are associated (or correlated) with Chengdu Xingrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xingrong Inv has no effect on the direction of Sinomach General i.e., Sinomach General and Chengdu Xingrong go up and down completely randomly.

Pair Corralation between Sinomach General and Chengdu Xingrong

Assuming the 90 days trading horizon Sinomach General Machinery is expected to generate 1.37 times more return on investment than Chengdu Xingrong. However, Sinomach General is 1.37 times more volatile than Chengdu Xingrong Investment. It trades about 0.12 of its potential returns per unit of risk. Chengdu Xingrong Investment is currently generating about -0.1 per unit of risk. If you would invest  1,501  in Sinomach General Machinery on December 26, 2024 and sell it today you would earn a total of  173.00  from holding Sinomach General Machinery or generate 11.53% return on investment over 90 days.

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

Sinomach General Machinery  vs.  Chengdu Xingrong Investment

Sinomach General Mac

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach General Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach General sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Xingrong Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chengdu Xingrong Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sinomach General and Chengdu Xingrong

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

The idea behind Sinomach General Machinery and Chengdu Xingrong Investment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.