Correlation Between Sanxiang Advanced and Aba Chemicals

Can any of the company-specific risk be diversified away by investing in both Sanxiang Advanced and Aba Chemicals 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 Aba Chemicals 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 Aba Chemicals Corp, you can compare the effects of market volatilities on Sanxiang Advanced and Aba Chemicals 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 Aba Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanxiang Advanced and Aba Chemicals.

Diversification Opportunities for Sanxiang Advanced and Aba Chemicals

0.46

Correlation Coefficient

Sanxiang Advanced  Aba Chemicals

Very weak diversification

The 3 months correlation between Sanxiang and Aba is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced Materials and Aba Chemicals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aba Chemicals Corp 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 Aba Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aba Chemicals Corp has no effect on the direction of Sanxiang Advanced i.e., Sanxiang Advanced and Aba Chemicals go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and Aba Chemicals

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 1.03 times more return on investment than Aba Chemicals. However, Sanxiang Advanced is 1.03 times more volatile than Aba Chemicals Corp. It trades about 0.04 of its potential returns per unit of risk. Aba Chemicals Corp is currently generating about -0.02 per unit of risk. If you would invest  1,197  in Sanxiang Advanced Materials on October 25, 2024 and sell it today you would earn a total of  550.00  from holding Sanxiang Advanced Materials or generate 45.95% 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.  Aba Chemicals Corp

Sanxiang Advanced

Risk-Adjusted Performance

0 of 100

Weak

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

Aba Chemicals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aba Chemicals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sanxiang Advanced and Aba Chemicals

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

The idea behind Sanxiang Advanced Materials and Aba Chemicals Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.