Correlation Between Shanghai Sanyou and Inner Mongolia

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

Diversification Opportunities for Shanghai Sanyou and Inner Mongolia

0.7

Correlation Coefficient

Shanghai Sanyou  Inner Mongolia

Poor diversification

The 3 months correlation between Shanghai and Inner is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Inner Mongolia Yitai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Yitai 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Yitai has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Inner Mongolia go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Inner Mongolia

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the Inner Mongolia. In addition to that, Shanghai Sanyou is 2.91 times more volatile than Inner Mongolia Yitai. It trades about -0.08 of its total potential returns per unit of risk. Inner Mongolia Yitai is currently generating about 0.13 per unit of volatility. If you would invest  202.00  in Inner Mongolia Yitai on October 27, 2024 and sell it today you would earn a total of  6.00  from holding Inner Mongolia Yitai or generate 2.97% 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.  Inner Mongolia Yitai

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 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.

Inner Mongolia Yitai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inner Mongolia Yitai 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.

Pair Trading with Shanghai Sanyou and Inner Mongolia

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

The idea behind Shanghai Sanyou Medical and Inner Mongolia Yitai 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.