Correlation Between Sanxiang Advanced and Shanghai V-Test

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

Diversification Opportunities for Sanxiang Advanced and Shanghai V-Test

0.89

Correlation Coefficient

Sanxiang Advanced  Shanghai V-Test

Very poor diversification

The 3 months correlation between Sanxiang and Shanghai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced Materials and Shanghai V Test Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai V Test 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 V-Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai V Test has no effect on the direction of Sanxiang Advanced i.e., Sanxiang Advanced and Shanghai V-Test go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and Shanghai V-Test

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 1.01 times more return on investment than Shanghai V-Test. However, Sanxiang Advanced is 1.01 times more volatile than Shanghai V Test Semiconductor. It trades about 0.17 of its potential returns per unit of risk. Shanghai V Test Semiconductor is currently generating about 0.13 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  634.00  from holding Sanxiang Advanced Materials or generate 38.31% return on investment over 90 days.

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

Sanxiang Advanced Materials  vs.  Shanghai V Test Semiconductor

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.

Shanghai V Test

Risk-Adjusted Performance

OK

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

Pair Trading with Sanxiang Advanced and Shanghai V-Test

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

The idea behind Sanxiang Advanced Materials and Shanghai V Test Semiconductor 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.