Correlation Between SICC and Yangmei Chemical

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

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

Diversification Opportunities for SICC and Yangmei Chemical

0.57

Correlation Coefficient

SICC  Yangmei Chemical

Very weak diversification

The 3 months correlation between SICC and Yangmei is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SICC Co and Yangmei Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yangmei Chemical and SICC 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 SICC Co are associated (or correlated) with Yangmei Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yangmei Chemical has no effect on the direction of SICC i.e., SICC and Yangmei Chemical go up and down completely randomly.

Pair Corralation between SICC and Yangmei Chemical

Assuming the 90 days trading horizon SICC Co is expected to under-perform the Yangmei Chemical. But the stock apears to be less risky and, when comparing its historical volatility, SICC Co is 1.97 times less risky than Yangmei Chemical. The stock trades about -0.15 of its potential returns per unit of risk. The Yangmei Chemical Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  249.00  in Yangmei Chemical Co on September 22, 2024 and sell it today you would lose (8.00) from holding Yangmei Chemical Co or give up 3.21% of portfolio value over 90 days.

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

SICC Co  vs.  Yangmei Chemical Co

SICC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SICC Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SICC sustained solid returns over the last few months and may actually be approaching a breakup point.

Yangmei Chemical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yangmei Chemical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yangmei Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SICC and Yangmei Chemical

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

The idea behind SICC Co and Yangmei Chemical 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.