Correlation Between Sinomach General and Dirui Industrial

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

Diversification Opportunities for Sinomach General and Dirui Industrial

0.2

Correlation Coefficient

Sinomach General  Dirui Industrial

Modest diversification

The 3 months correlation between Sinomach and Dirui is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach General Machinery and Dirui Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dirui Industrial 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 Dirui Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dirui Industrial has no effect on the direction of Sinomach General i.e., Sinomach General and Dirui Industrial go up and down completely randomly.

Pair Corralation between Sinomach General and Dirui Industrial

Assuming the 90 days trading horizon Sinomach General Machinery is expected to generate 1.15 times more return on investment than Dirui Industrial. However, Sinomach General is 1.15 times more volatile than Dirui Industrial Co. It trades about -0.01 of its potential returns per unit of risk. Dirui Industrial Co is currently generating about -0.14 per unit of risk. If you would invest  1,508  in Sinomach General Machinery on October 7, 2024 and sell it today you would lose (92.00) from holding Sinomach General Machinery or give up 6.1% of portfolio value over 90 days.

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

Sinomach General Machinery  vs.  Dirui Industrial Co

Sinomach General Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinomach General Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinomach General is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dirui Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dirui Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sinomach General and Dirui Industrial

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

The idea behind Sinomach General Machinery and Dirui Industrial Co 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.

Check out your portfolio center.

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.