Correlation Between Sinotrans and Sichuan Newsnet

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

Diversification Opportunities for Sinotrans and Sichuan Newsnet

0.2

Correlation Coefficient

Sinotrans  Sichuan Newsnet

Modest diversification

The 3 months correlation between Sinotrans and Sichuan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Sichuan Newsnet Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Newsnet Media 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 Sichuan Newsnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Newsnet Media has no effect on the direction of Sinotrans i.e., Sinotrans and Sichuan Newsnet go up and down completely randomly.

Pair Corralation between Sinotrans and Sichuan Newsnet

Assuming the 90 days trading horizon Sinotrans Ltd Class is expected to generate 0.38 times more return on investment than Sichuan Newsnet. However, Sinotrans Ltd Class is 2.62 times less risky than Sichuan Newsnet. It trades about 0.01 of its potential returns per unit of risk. Sichuan Newsnet Media is currently generating about -0.22 per unit of risk. If you would invest  525.00  in Sinotrans Ltd Class on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Sinotrans Ltd Class or generate 0.0% return on investment over 90 days.

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

Sinotrans Ltd Class  vs.  Sichuan Newsnet Media

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.

Sichuan Newsnet Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Newsnet Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sinotrans and Sichuan Newsnet

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

The idea behind Sinotrans Ltd Class and Sichuan Newsnet Media 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.