Correlation Between Road Environment and Sinofibers Technology

Can any of the company-specific risk be diversified away by investing in both Road Environment and Sinofibers Technology 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 Road Environment and Sinofibers Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Road Environment Technology and Sinofibers Technology Co, you can compare the effects of market volatilities on Road Environment and Sinofibers Technology 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 Road Environment with a short position of Sinofibers Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Road Environment and Sinofibers Technology.

Diversification Opportunities for Road Environment and Sinofibers Technology

0.34

Correlation Coefficient

Road Environment  Sinofibers Technology

Weak diversification

The 3 months correlation between Road and Sinofibers is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Road Environment Technology and Sinofibers Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinofibers Technology and Road Environment 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 Road Environment Technology are associated (or correlated) with Sinofibers Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinofibers Technology has no effect on the direction of Road Environment i.e., Road Environment and Sinofibers Technology go up and down completely randomly.

Pair Corralation between Road Environment and Sinofibers Technology

Assuming the 90 days trading horizon Road Environment Technology is expected to under-perform the Sinofibers Technology. But the stock apears to be less risky and, when comparing its historical volatility, Road Environment Technology is 1.0 times less risky than Sinofibers Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Sinofibers Technology Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,611  in Sinofibers Technology Co on October 11, 2024 and sell it today you would lose (2,936) from holding Sinofibers Technology Co or give up 52.33% of portfolio value over 90 days.

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

Road Environment Technology  vs.  Sinofibers Technology Co

Road Environment Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Road Environment Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Road Environment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sinofibers Technology

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Road Environment and Sinofibers Technology

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

The idea behind Road Environment Technology and Sinofibers Technology 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.