Correlation Between Sichuan Teway and Weihai Honglin

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

Diversification Opportunities for Sichuan Teway and Weihai Honglin

0.78

Correlation Coefficient

Sichuan Teway  Weihai Honglin

Poor diversification

The 3 months correlation between Sichuan and Weihai is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Teway Food and Weihai Honglin Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weihai Honglin Electronic 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 Weihai Honglin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weihai Honglin Electronic has no effect on the direction of Sichuan Teway i.e., Sichuan Teway and Weihai Honglin go up and down completely randomly.

Pair Corralation between Sichuan Teway and Weihai Honglin

Assuming the 90 days trading horizon Sichuan Teway Food is expected to generate 0.84 times more return on investment than Weihai Honglin. However, Sichuan Teway Food is 1.2 times less risky than Weihai Honglin. It trades about 0.01 of its potential returns per unit of risk. Weihai Honglin Electronic is currently generating about 0.0 per unit of risk. If you would invest  1,330  in Sichuan Teway Food on October 5, 2024 and sell it today you would earn a total of  30.00  from holding Sichuan Teway Food or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

Sichuan Teway Food  vs.  Weihai Honglin Electronic

Sichuan Teway Food

Risk-Adjusted Performance

4 of 100

Insignificant

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

Weihai Honglin Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sichuan Teway and Weihai Honglin

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

The idea behind Sichuan Teway Food and Weihai Honglin Electronic 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.