Correlation Between Sany Heavy and Railway Signal

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

By analyzing existing cross correlation between Sany Heavy Energy and Railway Signal Communication, you can compare the effects of market volatilities on Sany Heavy and Railway Signal 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 Sany Heavy with a short position of Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sany Heavy and Railway Signal.

Diversification Opportunities for Sany Heavy and Railway Signal

0.76

Correlation Coefficient

Sany Heavy  Railway Signal

Poor diversification

The 3 months correlation between Sany and Railway is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sany Heavy Energy and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu and Sany Heavy 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 Sany Heavy Energy are associated (or correlated) with Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of Sany Heavy i.e., Sany Heavy and Railway Signal go up and down completely randomly.

Pair Corralation between Sany Heavy and Railway Signal

Assuming the 90 days trading horizon Sany Heavy is expected to generate 2.19 times less return on investment than Railway Signal. But when comparing it to its historical volatility, Sany Heavy Energy is 1.04 times less risky than Railway Signal. It trades about 0.03 of its potential returns per unit of risk. Railway Signal Communication is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Railway Signal Communication on September 21, 2024 and sell it today you would earn a total of  195.00  from holding Railway Signal Communication or generate 43.43% return on investment over 90 days.

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

Sany Heavy Energy  vs.  Railway Signal Communication

Sany Heavy Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sany Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Railway Signal Commu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sany Heavy and Railway Signal

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

The idea behind Sany Heavy Energy and Railway Signal Communication 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.