Correlation Between Shanghai Sanyou and Goke Microelectronics

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

Diversification Opportunities for Shanghai Sanyou and Goke Microelectronics

0.74

Correlation Coefficient

Shanghai Sanyou  Goke Microelectronics

Poor diversification

The 3 months correlation between Shanghai and Goke is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Goke Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goke Microelectronics 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 Goke Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goke Microelectronics has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Goke Microelectronics go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Goke Microelectronics

Assuming the 90 days trading horizon Shanghai Sanyou is expected to generate 2.01 times less return on investment than Goke Microelectronics. In addition to that, Shanghai Sanyou is 1.32 times more volatile than Goke Microelectronics Co. It trades about 0.06 of its total potential returns per unit of risk. Goke Microelectronics Co is currently generating about 0.16 per unit of volatility. If you would invest  6,615  in Goke Microelectronics Co on September 29, 2024 and sell it today you would earn a total of  523.00  from holding Goke Microelectronics Co or generate 7.91% return on investment over 90 days.

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

Shanghai Sanyou Medical  vs.  Goke Microelectronics Co

Shanghai Sanyou Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Sanyou may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goke Microelectronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goke Microelectronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Goke Microelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Sanyou and Goke Microelectronics

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

The idea behind Shanghai Sanyou Medical and Goke Microelectronics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.