Correlation Between Shanghai Sanyou and Yindu Kitchen

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

Diversification Opportunities for Shanghai Sanyou and Yindu Kitchen

-0.1

Correlation Coefficient

Shanghai Sanyou  Yindu Kitchen

Good diversification

The 3 months correlation between Shanghai and Yindu is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Yindu Kitchen Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yindu Kitchen Equipment 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 Yindu Kitchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yindu Kitchen Equipment has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Yindu Kitchen go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Yindu Kitchen

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to generate 1.46 times more return on investment than Yindu Kitchen. However, Shanghai Sanyou is 1.46 times more volatile than Yindu Kitchen Equipment. It trades about 0.02 of its potential returns per unit of risk. Yindu Kitchen Equipment is currently generating about -0.01 per unit of risk. If you would invest  1,894  in Shanghai Sanyou Medical on October 7, 2024 and sell it today you would earn a total of  37.00  from holding Shanghai Sanyou Medical or generate 1.95% return on investment over 90 days.

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

Shanghai Sanyou Medical  vs.  Yindu Kitchen Equipment

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.

Yindu Kitchen Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yindu Kitchen Equipment 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 Yindu Kitchen

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

The idea behind Shanghai Sanyou Medical and Yindu Kitchen Equipment 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.