Correlation Between Sanxiang Advanced and CareRay Digital

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

Diversification Opportunities for Sanxiang Advanced and CareRay Digital

0.54

Correlation Coefficient

Sanxiang Advanced  CareRay Digital

Very weak diversification

The 3 months correlation between Sanxiang and CareRay is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sanxiang Advanced Materials and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Sanxiang Advanced i.e., Sanxiang Advanced and CareRay Digital go up and down completely randomly.

Pair Corralation between Sanxiang Advanced and CareRay Digital

Assuming the 90 days trading horizon Sanxiang Advanced Materials is expected to generate 0.83 times more return on investment than CareRay Digital. However, Sanxiang Advanced Materials is 1.2 times less risky than CareRay Digital. It trades about 0.03 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about -0.35 per unit of risk. If you would invest  1,720  in Sanxiang Advanced Materials on October 11, 2024 and sell it today you would earn a total of  18.00  from holding Sanxiang Advanced Materials or generate 1.05% 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.  CareRay Digital Medical

Sanxiang Advanced

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sanxiang Advanced Materials are ranked lower than 6 (%) 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.

CareRay Digital Medical

Risk-Adjusted Performance

3 of 100

Very Weak

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

Pair Trading with Sanxiang Advanced and CareRay Digital

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

The idea behind Sanxiang Advanced Materials and CareRay Digital Medical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.