Correlation Between Dr Peng and Shanghai Sanyou

Can any of the company-specific risk be diversified away by investing in both Dr Peng and Shanghai Sanyou 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 Dr Peng and Shanghai Sanyou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dr Peng Telecom and Shanghai Sanyou Medical, you can compare the effects of market volatilities on Dr Peng and Shanghai Sanyou 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 Dr Peng with a short position of Shanghai Sanyou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Shanghai Sanyou.

Diversification Opportunities for Dr Peng and Shanghai Sanyou

0.21

Correlation Coefficient

Dr Peng  Shanghai Sanyou

Modest diversification

The 3 months correlation between 600804 and Shanghai is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Shanghai Sanyou Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Sanyou Medical and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Shanghai Sanyou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Sanyou Medical has no effect on the direction of Dr Peng i.e., Dr Peng and Shanghai Sanyou go up and down completely randomly.

Pair Corralation between Dr Peng and Shanghai Sanyou

Assuming the 90 days trading horizon Dr Peng Telecom is expected to under-perform the Shanghai Sanyou. In addition to that, Dr Peng is 1.23 times more volatile than Shanghai Sanyou Medical. It trades about -0.02 of its total potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about -0.01 per unit of volatility. If you would invest  2,715  in Shanghai Sanyou Medical on October 24, 2024 and sell it today you would lose (693.00) from holding Shanghai Sanyou Medical or give up 25.52% of portfolio value over 90 days.

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

Dr Peng Telecom  vs.  Shanghai Sanyou Medical

Dr Peng Telecom

Risk-Adjusted Performance

9 of 100

OK

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

Shanghai Sanyou Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Sanyou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dr Peng and Shanghai Sanyou

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

The idea behind Dr Peng Telecom and Shanghai Sanyou Medical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.