Correlation Between Sinotrans and Threes Company

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

Diversification Opportunities for Sinotrans and Threes Company

0.38

Correlation Coefficient

Sinotrans  Threes Company

Weak diversification

The 3 months correlation between Sinotrans and Threes is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Threes Company Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Threes Company 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 Threes Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Threes Company has no effect on the direction of Sinotrans i.e., Sinotrans and Threes Company go up and down completely randomly.

Pair Corralation between Sinotrans and Threes Company

Assuming the 90 days trading horizon Sinotrans Ltd Class is expected to generate 0.57 times more return on investment than Threes Company. However, Sinotrans Ltd Class is 1.77 times less risky than Threes Company. It trades about 0.04 of its potential returns per unit of risk. Threes Company Media is currently generating about -0.02 per unit of risk. If you would invest  375.00  in Sinotrans Ltd Class on October 5, 2024 and sell it today you would earn a total of  150.00  from holding Sinotrans Ltd Class or generate 40.0% 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.  Threes Company 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.

Threes Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Threes Company Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Threes Company 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 Threes Company

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

The idea behind Sinotrans Ltd Class and Threes Company 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.