Correlation Between Shanghai Sanyou and Der International

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Can any of the company-specific risk be diversified away by investing in both Shanghai Sanyou and Der 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 Der 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 Der International Home, you can compare the effects of market volatilities on Shanghai Sanyou and Der 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 Der International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Sanyou and Der International.

Diversification Opportunities for Shanghai Sanyou and Der International

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Der is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Der International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Der International Home 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 Der International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Der International Home has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Der International go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Der International

Assuming the 90 days trading horizon Shanghai Sanyou is expected to generate 30.87 times less return on investment than Der International. But when comparing it to its historical volatility, Shanghai Sanyou Medical is 1.64 times less risky than Der International. It trades about 0.01 of its potential returns per unit of risk. Der International Home is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Der International Home on September 24, 2024 and sell it today you would earn a total of  65.00  from holding Der International Home or generate 13.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanghai Sanyou Medical  vs.  Der International Home

 Performance 
       Timeline  
Shanghai Sanyou Medical 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Sanyou sustained solid returns over the last few months and may actually be approaching a breakup point.
Der International Home 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Der International Home are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Der International sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Sanyou and Der International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Sanyou and Der International

The main advantage of trading using opposite Shanghai Sanyou and Der International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Sanyou position performs unexpectedly, Der 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 Der International will offset losses from the drop in Der International's long position.
The idea behind Shanghai Sanyou Medical and Der International Home 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.
Check out your portfolio center.
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.

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