Correlation Between Shuhua Sports and Sichuan Swellfun

Can any of the company-specific risk be diversified away by investing in both Shuhua Sports and Sichuan Swellfun 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 Shuhua Sports and Sichuan Swellfun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shuhua Sports Co and Sichuan Swellfun Co, you can compare the effects of market volatilities on Shuhua Sports and Sichuan Swellfun 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 Shuhua Sports with a short position of Sichuan Swellfun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shuhua Sports and Sichuan Swellfun.

Diversification Opportunities for Shuhua Sports and Sichuan Swellfun

-0.27

Correlation Coefficient

Shuhua Sports  Sichuan Swellfun

Very good diversification

The 3 months correlation between Shuhua and Sichuan is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shuhua Sports Co and Sichuan Swellfun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Swellfun and Shuhua Sports 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 Shuhua Sports Co are associated (or correlated) with Sichuan Swellfun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Swellfun has no effect on the direction of Shuhua Sports i.e., Shuhua Sports and Sichuan Swellfun go up and down completely randomly.

Pair Corralation between Shuhua Sports and Sichuan Swellfun

Assuming the 90 days trading horizon Shuhua Sports Co is expected to generate 1.81 times more return on investment than Sichuan Swellfun. However, Shuhua Sports is 1.81 times more volatile than Sichuan Swellfun Co. It trades about 0.04 of its potential returns per unit of risk. Sichuan Swellfun Co is currently generating about -0.15 per unit of risk. If you would invest  859.00  in Shuhua Sports Co on December 2, 2024 and sell it today you would earn a total of  39.00  from holding Shuhua Sports Co or generate 4.54% return on investment over 90 days.

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

Shuhua Sports Co  vs.  Sichuan Swellfun Co

Shuhua Sports

Risk-Adjusted Performance

Insignificant

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

Sichuan Swellfun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Swellfun Co 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 Shuhua Sports and Sichuan Swellfun

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

The idea behind Shuhua Sports Co and Sichuan Swellfun Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.