Correlation Between Ming Yang and Sinocat Environmental

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

By analyzing existing cross correlation between Ming Yang Smart and Sinocat Environmental Technology, you can compare the effects of market volatilities on Ming Yang and Sinocat Environmental 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 Ming Yang with a short position of Sinocat Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and Sinocat Environmental.

Diversification Opportunities for Ming Yang and Sinocat Environmental

0.74

Correlation Coefficient

Ming Yang  Sinocat Environmental

Poor diversification

The 3 months correlation between Ming and Sinocat is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and Sinocat Environmental Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocat Environmental and Ming Yang 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 Ming Yang Smart are associated (or correlated) with Sinocat Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocat Environmental has no effect on the direction of Ming Yang i.e., Ming Yang and Sinocat Environmental go up and down completely randomly.

Pair Corralation between Ming Yang and Sinocat Environmental

Assuming the 90 days trading horizon Ming Yang Smart is expected to under-perform the Sinocat Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Ming Yang Smart is 1.35 times less risky than Sinocat Environmental. The stock trades about -0.07 of its potential returns per unit of risk. The Sinocat Environmental Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,851  in Sinocat Environmental Technology on October 24, 2024 and sell it today you would lose (1,161) from holding Sinocat Environmental Technology or give up 40.72% of portfolio value over 90 days.

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

Ming Yang Smart  vs.  Sinocat Environmental Technolo

Ming Yang Smart

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinocat Environmental

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and Sinocat Environmental

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

The idea behind Ming Yang Smart and Sinocat Environmental Technology 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.