Correlation Between Sinosteel Luonai and Oppein Home

Can any of the company-specific risk be diversified away by investing in both Sinosteel Luonai and Oppein Home 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 Sinosteel Luonai and Oppein Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinosteel Luonai Materials and Oppein Home Group, you can compare the effects of market volatilities on Sinosteel Luonai and Oppein Home 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 Sinosteel Luonai with a short position of Oppein Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinosteel Luonai and Oppein Home.

Diversification Opportunities for Sinosteel Luonai and Oppein Home

0.84

Correlation Coefficient

Sinosteel Luonai  Oppein Home

Very poor diversification

The 3 months correlation between Sinosteel and Oppein is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sinosteel Luonai Materials and Oppein Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppein Home Group and Sinosteel Luonai 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 Sinosteel Luonai Materials are associated (or correlated) with Oppein Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppein Home Group has no effect on the direction of Sinosteel Luonai i.e., Sinosteel Luonai and Oppein Home go up and down completely randomly.

Pair Corralation between Sinosteel Luonai and Oppein Home

Assuming the 90 days trading horizon Sinosteel Luonai Materials is expected to under-perform the Oppein Home. But the stock apears to be less risky and, when comparing its historical volatility, Sinosteel Luonai Materials is 1.43 times less risky than Oppein Home. The stock trades about -0.3 of its potential returns per unit of risk. The Oppein Home Group is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  7,450  in Oppein Home Group on October 2, 2024 and sell it today you would lose (556.00) from holding Oppein Home Group or give up 7.46% of portfolio value over 90 days.

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

Sinosteel Luonai Materials  vs.  Oppein Home Group

Sinosteel Luonai Mat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Oppein Home Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oppein Home Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oppein Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinosteel Luonai and Oppein Home

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

The idea behind Sinosteel Luonai Materials and Oppein Home Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.