Correlation Between Sinotrans and Guangdong Transtek

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

By analyzing existing cross correlation between Sinotrans Ltd Class and Guangdong Transtek Medical, you can compare the effects of market volatilities on Sinotrans and Guangdong Transtek 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 Sinotrans with a short position of Guangdong Transtek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and Guangdong Transtek.

Diversification Opportunities for Sinotrans and Guangdong Transtek

0.59

Correlation Coefficient

Sinotrans  Guangdong Transtek

Very weak diversification

The 3 months correlation between Sinotrans and Guangdong is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Guangdong Transtek Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Transtek and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with Guangdong Transtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Transtek has no effect on the direction of Sinotrans i.e., Sinotrans and Guangdong Transtek go up and down completely randomly.

Pair Corralation between Sinotrans and Guangdong Transtek

Assuming the 90 days trading horizon Sinotrans Ltd Class is expected to generate 0.26 times more return on investment than Guangdong Transtek. However, Sinotrans Ltd Class is 3.79 times less risky than Guangdong Transtek. It trades about -0.01 of its potential returns per unit of risk. Guangdong Transtek Medical is currently generating about -0.02 per unit of risk. If you would invest  528.00  in Sinotrans Ltd Class on October 26, 2024 and sell it today you would lose (5.00) from holding Sinotrans Ltd Class or give up 0.95% of portfolio value over 90 days.

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

Sinotrans Ltd Class  vs.  Guangdong Transtek Medical

Sinotrans Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guangdong Transtek

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sinotrans and Guangdong Transtek

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

The idea behind Sinotrans Ltd Class and Guangdong Transtek 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.