Correlation Between China State and Sinomach Automobile

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Can any of the company-specific risk be diversified away by investing in both China State and Sinomach Automobile 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 China State and Sinomach Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China State Construction and Sinomach Automobile Co, you can compare the effects of market volatilities on China State and Sinomach Automobile 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 China State with a short position of Sinomach Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Sinomach Automobile.

Diversification Opportunities for China State and Sinomach Automobile

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between China and Sinomach is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Sinomach Automobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach Automobile and China State 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 China State Construction are associated (or correlated) with Sinomach Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach Automobile has no effect on the direction of China State i.e., China State and Sinomach Automobile go up and down completely randomly.

Pair Corralation between China State and Sinomach Automobile

Assuming the 90 days trading horizon China State Construction is expected to generate 0.88 times more return on investment than Sinomach Automobile. However, China State Construction is 1.13 times less risky than Sinomach Automobile. It trades about 0.04 of its potential returns per unit of risk. Sinomach Automobile Co is currently generating about 0.03 per unit of risk. If you would invest  561.00  in China State Construction on September 5, 2024 and sell it today you would earn a total of  45.00  from holding China State Construction or generate 8.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

China State Construction  vs.  Sinomach Automobile Co

 Performance 
       Timeline  
China State Construction 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China State Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China State sustained solid returns over the last few months and may actually be approaching a breakup point.
Sinomach Automobile 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach Automobile Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

China State and Sinomach Automobile Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China State and Sinomach Automobile

The main advantage of trading using opposite China State and Sinomach Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State position performs unexpectedly, Sinomach Automobile 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 Sinomach Automobile will offset losses from the drop in Sinomach Automobile's long position.
The idea behind China State Construction and Sinomach Automobile Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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