Correlation Between Sinomach General and Xiangpiaopiao Food

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

Diversification Opportunities for Sinomach General and Xiangpiaopiao Food

0.45

Correlation Coefficient

Sinomach General  Xiangpiaopiao Food

Very weak diversification

The 3 months correlation between Sinomach and Xiangpiaopiao is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sinomach General Machinery and Xiangpiaopiao Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangpiaopiao Food 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 Xiangpiaopiao Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangpiaopiao Food has no effect on the direction of Sinomach General i.e., Sinomach General and Xiangpiaopiao Food go up and down completely randomly.

Pair Corralation between Sinomach General and Xiangpiaopiao Food

Assuming the 90 days trading horizon Sinomach General Machinery is expected to under-perform the Xiangpiaopiao Food. But the stock apears to be less risky and, when comparing its historical volatility, Sinomach General Machinery is 1.33 times less risky than Xiangpiaopiao Food. The stock trades about -0.01 of its potential returns per unit of risk. The Xiangpiaopiao Food Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,319  in Xiangpiaopiao Food Co on October 8, 2024 and sell it today you would earn a total of  243.00  from holding Xiangpiaopiao Food Co or generate 18.42% 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.  Xiangpiaopiao Food 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.

Xiangpiaopiao Food

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangpiaopiao Food Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangpiaopiao Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinomach General and Xiangpiaopiao Food

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

The idea behind Sinomach General Machinery and Xiangpiaopiao Food 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.