Correlation Between Sinomach General and Shantui Construction

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

Diversification Opportunities for Sinomach General and Shantui Construction

0.49

Correlation Coefficient

Sinomach General  Shantui Construction

Very weak diversification

The 3 months correlation between Sinomach and Shantui is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach General Machinery and Shantui Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantui Construction 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 Shantui Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantui Construction has no effect on the direction of Sinomach General i.e., Sinomach General and Shantui Construction go up and down completely randomly.

Pair Corralation between Sinomach General and Shantui Construction

Assuming the 90 days trading horizon Sinomach General Machinery is expected to generate 1.21 times more return on investment than Shantui Construction. However, Sinomach General is 1.21 times more volatile than Shantui Construction Machinery. It trades about 0.16 of its potential returns per unit of risk. Shantui Construction Machinery is currently generating about 0.16 per unit of risk. If you would invest  1,152  in Sinomach General Machinery on September 21, 2024 and sell it today you would earn a total of  471.00  from holding Sinomach General Machinery or generate 40.89% return on investment over 90 days.

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

Sinomach General Machinery  vs.  Shantui Construction Machinery

Sinomach General Mac

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach General Machinery are ranked lower than 12 (%) 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.

Shantui Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantui Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinomach General and Shantui Construction

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

The idea behind Sinomach General Machinery and Shantui Construction Machinery 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.