Correlation Between Shanghai Sanyou and Xian International

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

By analyzing existing cross correlation between Shanghai Sanyou Medical and Xian International Medical, you can compare the effects of market volatilities on Shanghai Sanyou and Xian International 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 Sanyou with a short position of Xian International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Sanyou and Xian International.

Diversification Opportunities for Shanghai Sanyou and Xian International

0.68

Correlation Coefficient

Shanghai Sanyou  Xian International

Poor diversification

The 3 months correlation between Shanghai and Xian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Xian International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xian International and Shanghai Sanyou 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 Sanyou Medical are associated (or correlated) with Xian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xian International has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Xian International go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Xian International

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to generate 1.03 times more return on investment than Xian International. However, Shanghai Sanyou is 1.03 times more volatile than Xian International Medical. It trades about -0.05 of its potential returns per unit of risk. Xian International Medical is currently generating about -0.08 per unit of risk. If you would invest  2,225  in Shanghai Sanyou Medical on October 8, 2024 and sell it today you would lose (294.00) from holding Shanghai Sanyou Medical or give up 13.21% of portfolio value over 90 days.

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

Shanghai Sanyou Medical  vs.  Xian International Medical

Shanghai Sanyou Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Sanyou Medical 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.

Xian International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xian International Medical 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shanghai Sanyou and Xian International

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

The idea behind Shanghai Sanyou Medical and Xian International 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.