Correlation Between Railway Signal and Sinomach General

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

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

Diversification Opportunities for Railway Signal and Sinomach General

0.81

Correlation Coefficient

Railway Signal  Sinomach General

Very poor diversification

The 3 months correlation between Railway and Sinomach is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Railway Signal Communication 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 Railway Signal 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 Railway Signal Communication 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 Railway Signal i.e., Railway Signal and Sinomach General go up and down completely randomly.

Pair Corralation between Railway Signal and Sinomach General

Assuming the 90 days trading horizon Railway Signal Communication is expected to generate 0.63 times more return on investment than Sinomach General. However, Railway Signal Communication is 1.6 times less risky than Sinomach General. It trades about -0.14 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  643.00  in Railway Signal Communication on December 2, 2024 and sell it today you would lose (65.00) from holding Railway Signal Communication or give up 10.11% of portfolio value over 90 days.

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

Railway Signal Communication  vs.  Sinomach General Machinery

Railway Signal Commu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Railway Signal Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Railway Signal and Sinomach General

The main advantage of trading using opposite Railway Signal and Sinomach General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Railway Signal 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 Railway Signal Communication 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.