Correlation Between Shanghai Action and Sinomach General

Can any of the company-specific risk be diversified away by investing in both Shanghai Action and Sinomach General 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 Shanghai Action and Sinomach General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Action Education and Sinomach General Machinery, you can compare the effects of market volatilities on Shanghai Action and Sinomach General 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 Shanghai Action with a short position of Sinomach General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Action and Sinomach General.

Diversification Opportunities for Shanghai Action and Sinomach General

-0.29

Correlation Coefficient

Shanghai Action  Sinomach General

Very good diversification

The 3 months correlation between Shanghai and Sinomach is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Action Education and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac and Shanghai Action 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 Shanghai Action Education are associated (or correlated) with Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Shanghai Action i.e., Shanghai Action and Sinomach General go up and down completely randomly.

Pair Corralation between Shanghai Action and Sinomach General

Assuming the 90 days trading horizon Shanghai Action Education is expected to generate 1.13 times more return on investment than Sinomach General. However, Shanghai Action is 1.13 times more volatile than Sinomach General Machinery. It trades about 0.07 of its potential returns per unit of risk. Sinomach General Machinery is currently generating about -0.11 per unit of risk. If you would invest  3,617  in Shanghai Action Education on December 2, 2024 and sell it today you would earn a total of  283.00  from holding Shanghai Action Education or generate 7.82% return on investment over 90 days.

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

Shanghai Action Education  vs.  Sinomach General Machinery

Shanghai Action Education

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Action Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Action may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sinomach General Mac

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinomach General Machinery 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shanghai Action and Sinomach General

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

The idea behind Shanghai Action Education and Sinomach General Machinery 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.