Correlation Between ECOVE Environment and Sheng Yu

Can any of the company-specific risk be diversified away by investing in both ECOVE Environment and Sheng Yu 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 ECOVE Environment and Sheng Yu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECOVE Environment Corp and Sheng Yu Steel, you can compare the effects of market volatilities on ECOVE Environment and Sheng Yu 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 ECOVE Environment with a short position of Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECOVE Environment and Sheng Yu.

Diversification Opportunities for ECOVE Environment and Sheng Yu

0.23

Correlation Coefficient

ECOVE Environment  Sheng Yu

Modest diversification

The 3 months correlation between ECOVE and Sheng is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ECOVE Environment Corp and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel and ECOVE Environment 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 ECOVE Environment Corp are associated (or correlated) with Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of ECOVE Environment i.e., ECOVE Environment and Sheng Yu go up and down completely randomly.

Pair Corralation between ECOVE Environment and Sheng Yu

Assuming the 90 days trading horizon ECOVE Environment Corp is expected to under-perform the Sheng Yu. But the stock apears to be less risky and, when comparing its historical volatility, ECOVE Environment Corp is 1.69 times less risky than Sheng Yu. The stock trades about -0.05 of its potential returns per unit of risk. The Sheng Yu Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,480  in Sheng Yu Steel on September 15, 2024 and sell it today you would lose (15.00) from holding Sheng Yu Steel or give up 0.6% of portfolio value over 90 days.

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

ECOVE Environment Corp  vs.  Sheng Yu Steel

ECOVE Environment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECOVE Environment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ECOVE Environment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sheng Yu Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sheng Yu Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sheng Yu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ECOVE Environment and Sheng Yu

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

The idea behind ECOVE Environment Corp and Sheng Yu Steel 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.