Correlation Between Sinotrans and Anhui Xinhua

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

Diversification Opportunities for Sinotrans and Anhui Xinhua

0.3

Correlation Coefficient

Sinotrans  Anhui Xinhua

Weak diversification

The 3 months correlation between Sinotrans and Anhui is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Anhui Xinhua Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Xinhua 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 Anhui Xinhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Xinhua Media has no effect on the direction of Sinotrans i.e., Sinotrans and Anhui Xinhua go up and down completely randomly.

Pair Corralation between Sinotrans and Anhui Xinhua

Assuming the 90 days trading horizon Sinotrans is expected to generate 2.49 times less return on investment than Anhui Xinhua. But when comparing it to its historical volatility, Sinotrans Ltd Class is 1.34 times less risky than Anhui Xinhua. It trades about 0.01 of its potential returns per unit of risk. Anhui Xinhua Media is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  692.00  in Anhui Xinhua Media on October 5, 2024 and sell it today you would earn a total of  45.00  from holding Anhui Xinhua Media or generate 6.5% 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.  Anhui Xinhua 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.

Anhui Xinhua Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Xinhua Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anhui Xinhua 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 Anhui Xinhua

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

The idea behind Sinotrans Ltd Class and Anhui Xinhua 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.