Correlation Between Sanxiang Advanced and Shanghai Jinfeng

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

Diversification Opportunities for Sanxiang Advanced and Shanghai Jinfeng

-0.04

Correlation Coefficient

Sanxiang Advanced  Shanghai Jinfeng

Good diversification

The 3 months correlation between Sanxiang and Shanghai is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced Materials and Shanghai Jinfeng Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jinfeng Wine 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 Shanghai Jinfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jinfeng Wine has no effect on the direction of Sanxiang Advanced i.e., Sanxiang Advanced and Shanghai Jinfeng go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and Shanghai Jinfeng

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 0.92 times more return on investment than Shanghai Jinfeng. However, Sanxiang Advanced Materials is 1.09 times less risky than Shanghai Jinfeng. It trades about 0.23 of its potential returns per unit of risk. Shanghai Jinfeng Wine is currently generating about -0.1 per unit of risk. If you would invest  1,586  in Sanxiang Advanced Materials on October 22, 2024 and sell it today you would earn a total of  192.00  from holding Sanxiang Advanced Materials or generate 12.11% return on investment over 90 days.

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

Sanxiang Advanced Materials  vs.  Shanghai Jinfeng Wine

Sanxiang Advanced

Risk-Adjusted Performance

3 of 100

Insignificant

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

Shanghai Jinfeng Wine

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Sanxiang Advanced and Shanghai Jinfeng

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

The idea behind Sanxiang Advanced Materials and Shanghai Jinfeng Wine 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.