Correlation Between Shanghai Sanyou and Jinhui Liquor

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

Diversification Opportunities for Shanghai Sanyou and Jinhui Liquor

0.54

Correlation Coefficient

Shanghai Sanyou  Jinhui Liquor

Very weak diversification

The 3 months correlation between Shanghai and Jinhui is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor 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 Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Jinhui Liquor go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Jinhui Liquor

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the Jinhui Liquor. In addition to that, Shanghai Sanyou is 1.83 times more volatile than Jinhui Liquor Co. It trades about -0.04 of its total potential returns per unit of risk. Jinhui Liquor Co is currently generating about -0.06 per unit of volatility. If you would invest  2,005  in Jinhui Liquor Co on December 26, 2024 and sell it today you would lose (107.00) from holding Jinhui Liquor Co or give up 5.34% of portfolio value over 90 days.

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

Shanghai Sanyou Medical  vs.  Jinhui Liquor Co

Shanghai Sanyou Medical

Risk-Adjusted Performance

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.

Jinhui Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jinhui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jinhui Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Sanyou and Jinhui Liquor

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

The idea behind Shanghai Sanyou Medical and Jinhui Liquor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.