Correlation Between Shaanxi Broadcast and Sinosteel Engineering

Can any of the company-specific risk be diversified away by investing in both Shaanxi Broadcast and Sinosteel Engineering 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 Shaanxi Broadcast and Sinosteel Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaanxi Broadcast TV and Sinosteel Engineering and, you can compare the effects of market volatilities on Shaanxi Broadcast and Sinosteel Engineering 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 Shaanxi Broadcast with a short position of Sinosteel Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Broadcast and Sinosteel Engineering.

Diversification Opportunities for Shaanxi Broadcast and Sinosteel Engineering

0.94

Correlation Coefficient

Shaanxi Broadcast  Sinosteel Engineering

Almost no diversification

The 3 months correlation between Shaanxi and Sinosteel is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Broadcast TV and Sinosteel Engineering and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinosteel Engineering and and Shaanxi Broadcast 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 Shaanxi Broadcast TV are associated (or correlated) with Sinosteel Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinosteel Engineering and has no effect on the direction of Shaanxi Broadcast i.e., Shaanxi Broadcast and Sinosteel Engineering go up and down completely randomly.

Pair Corralation between Shaanxi Broadcast and Sinosteel Engineering

Assuming the 90 days trading horizon Shaanxi Broadcast TV is expected to generate 1.01 times more return on investment than Sinosteel Engineering. However, Shaanxi Broadcast is 1.01 times more volatile than Sinosteel Engineering and. It trades about 0.2 of its potential returns per unit of risk. Sinosteel Engineering and is currently generating about 0.17 per unit of risk. If you would invest  201.00  in Shaanxi Broadcast TV on August 31, 2024 and sell it today you would earn a total of  71.00  from holding Shaanxi Broadcast TV or generate 35.32% return on investment over 90 days.

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

Shaanxi Broadcast TV  vs.  Sinosteel Engineering and

Shaanxi Broadcast

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Broadcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Sinosteel Engineering and

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinosteel Engineering and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinosteel Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaanxi Broadcast and Sinosteel Engineering

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

The idea behind Shaanxi Broadcast TV and Sinosteel Engineering and 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.