Correlation Between Sichuan Teway and State Grid

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

Diversification Opportunities for Sichuan Teway and State Grid

0.79

Correlation Coefficient

Sichuan Teway  State Grid

Poor diversification

The 3 months correlation between Sichuan and State is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Teway Food and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of Sichuan Teway i.e., Sichuan Teway and State Grid go up and down completely randomly.

Pair Corralation between Sichuan Teway and State Grid

Assuming the 90 days trading horizon Sichuan Teway Food is expected to under-perform the State Grid. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Teway Food is 1.29 times less risky than State Grid. The stock trades about -0.02 of its potential returns per unit of risk. The State Grid InformationCommunication is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,935  in State Grid InformationCommunication on September 27, 2024 and sell it today you would earn a total of  15.00  from holding State Grid InformationCommunication or generate 0.78% return on investment over 90 days.

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

Sichuan Teway Food  vs.  State Grid InformationCommunic

Sichuan Teway Food

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Teway Food are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Teway sustained solid returns over the last few months and may actually be approaching a breakup point.

State Grid Informati

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Grid InformationCommunication are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, State Grid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sichuan Teway and State Grid

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

The idea behind Sichuan Teway Food and State Grid InformationCommunication 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.