Correlation Between Sanxiang Advanced and Suofeiya Home

Can any of the company-specific risk be diversified away by investing in both Sanxiang Advanced and Suofeiya Home 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 Sanxiang Advanced and Suofeiya Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sanxiang Advanced Materials and Suofeiya Home Collection, you can compare the effects of market volatilities on Sanxiang Advanced and Suofeiya Home 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 Sanxiang Advanced with a short position of Suofeiya Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanxiang Advanced and Suofeiya Home.

Diversification Opportunities for Sanxiang Advanced and Suofeiya Home

0.43

Correlation Coefficient

Sanxiang Advanced  Suofeiya Home

Very weak diversification

The 3 months correlation between Sanxiang and Suofeiya is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced Materials and Suofeiya Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suofeiya Home Collection and Sanxiang Advanced 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 Sanxiang Advanced Materials are associated (or correlated) with Suofeiya Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suofeiya Home Collection has no effect on the direction of Sanxiang Advanced i.e., Sanxiang Advanced and Suofeiya Home go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and Suofeiya Home

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 1.75 times more return on investment than Suofeiya Home. However, Sanxiang Advanced is 1.75 times more volatile than Suofeiya Home Collection. It trades about 0.17 of its potential returns per unit of risk. Suofeiya Home Collection is currently generating about -0.03 per unit of risk. If you would invest  1,655  in Sanxiang Advanced Materials on December 27, 2024 and sell it today you would earn a total of  612.00  from holding Sanxiang Advanced Materials or generate 36.98% return on investment over 90 days.

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

Sanxiang Advanced Materials  vs.  Suofeiya Home Collection

Sanxiang Advanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanxiang Advanced Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanxiang Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Suofeiya Home Collection

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sanxiang Advanced and Suofeiya Home

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

The idea behind Sanxiang Advanced Materials and Suofeiya Home Collection 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.