Correlation Between Sichuan Teway and Changzhou Evergreen

Can any of the company-specific risk be diversified away by investing in both Sichuan Teway and Changzhou Evergreen 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 Sichuan Teway and Changzhou Evergreen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Teway Food and Changzhou Evergreen Technology, you can compare the effects of market volatilities on Sichuan Teway and Changzhou Evergreen 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 Sichuan Teway with a short position of Changzhou Evergreen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Teway and Changzhou Evergreen.

Diversification Opportunities for Sichuan Teway and Changzhou Evergreen

0.12

Correlation Coefficient

Sichuan Teway  Changzhou Evergreen

Average diversification

The 3 months correlation between Sichuan and Changzhou is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Teway Food and Changzhou Evergreen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changzhou Evergreen and Sichuan Teway 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 Sichuan Teway Food are associated (or correlated) with Changzhou Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changzhou Evergreen has no effect on the direction of Sichuan Teway i.e., Sichuan Teway and Changzhou Evergreen go up and down completely randomly.

Pair Corralation between Sichuan Teway and Changzhou Evergreen

Assuming the 90 days trading horizon Sichuan Teway is expected to generate 13.75 times less return on investment than Changzhou Evergreen. But when comparing it to its historical volatility, Sichuan Teway Food is 1.4 times less risky than Changzhou Evergreen. It trades about 0.01 of its potential returns per unit of risk. Changzhou Evergreen Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,727  in Changzhou Evergreen Technology on December 26, 2024 and sell it today you would earn a total of  132.00  from holding Changzhou Evergreen Technology or generate 7.64% return on investment over 90 days.

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

Sichuan Teway Food  vs.  Changzhou Evergreen Technology

Sichuan Teway Food

Risk-Adjusted Performance

Very Weak

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

Changzhou Evergreen

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changzhou Evergreen Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changzhou Evergreen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sichuan Teway and Changzhou Evergreen

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

The idea behind Sichuan Teway Food and Changzhou Evergreen 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.