Correlation Between Sino Platinum and Zhejiang Huatong

Can any of the company-specific risk be diversified away by investing in both Sino Platinum and Zhejiang Huatong 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 Sino Platinum and Zhejiang Huatong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sino Platinum Metals Co and Zhejiang Huatong Meat, you can compare the effects of market volatilities on Sino Platinum and Zhejiang Huatong 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 Sino Platinum with a short position of Zhejiang Huatong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino Platinum and Zhejiang Huatong.

Diversification Opportunities for Sino Platinum and Zhejiang Huatong

0.6

Correlation Coefficient

Sino Platinum  Zhejiang Huatong

Poor diversification

The 3 months correlation between Sino and Zhejiang is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sino Platinum Metals Co and Zhejiang Huatong Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Huatong Meat and Sino Platinum 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 Sino Platinum Metals Co are associated (or correlated) with Zhejiang Huatong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Huatong Meat has no effect on the direction of Sino Platinum i.e., Sino Platinum and Zhejiang Huatong go up and down completely randomly.

Pair Corralation between Sino Platinum and Zhejiang Huatong

Assuming the 90 days trading horizon Sino Platinum Metals Co is expected to under-perform the Zhejiang Huatong. But the stock apears to be less risky and, when comparing its historical volatility, Sino Platinum Metals Co is 3.65 times less risky than Zhejiang Huatong. The stock trades about -0.11 of its potential returns per unit of risk. The Zhejiang Huatong Meat is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,266  in Zhejiang Huatong Meat on September 25, 2024 and sell it today you would earn a total of  19.00  from holding Zhejiang Huatong Meat or generate 1.5% return on investment over 90 days.

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

Sino Platinum Metals Co  vs.  Zhejiang Huatong Meat

Sino Platinum Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Platinum Metals Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sino Platinum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhejiang Huatong Meat

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Huatong Meat are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Huatong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sino Platinum and Zhejiang Huatong

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

The idea behind Sino Platinum Metals Co and Zhejiang Huatong Meat 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.