Correlation Between Leaguer Shenzhen and Shandong Sanyuan

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

By analyzing existing cross correlation between Leaguer Shenzhen MicroElectronics and Shandong Sanyuan Biotechnology, you can compare the effects of market volatilities on Leaguer Shenzhen and Shandong Sanyuan 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 Leaguer Shenzhen with a short position of Shandong Sanyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leaguer Shenzhen and Shandong Sanyuan.

Diversification Opportunities for Leaguer Shenzhen and Shandong Sanyuan

0.93

Correlation Coefficient

Leaguer Shenzhen  Shandong Sanyuan

Almost no diversification

The 3 months correlation between Leaguer and Shandong is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Leaguer Shenzhen MicroElectron and Shandong Sanyuan Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Sanyuan Bio and Leaguer Shenzhen 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 Leaguer Shenzhen MicroElectronics are associated (or correlated) with Shandong Sanyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Sanyuan Bio has no effect on the direction of Leaguer Shenzhen i.e., Leaguer Shenzhen and Shandong Sanyuan go up and down completely randomly.

Pair Corralation between Leaguer Shenzhen and Shandong Sanyuan

Assuming the 90 days trading horizon Leaguer Shenzhen MicroElectronics is expected to generate 1.61 times more return on investment than Shandong Sanyuan. However, Leaguer Shenzhen is 1.61 times more volatile than Shandong Sanyuan Biotechnology. It trades about 0.19 of its potential returns per unit of risk. Shandong Sanyuan Biotechnology is currently generating about 0.15 per unit of risk. If you would invest  1,824  in Leaguer Shenzhen MicroElectronics on September 15, 2024 and sell it today you would earn a total of  1,046  from holding Leaguer Shenzhen MicroElectronics or generate 57.35% return on investment over 90 days.

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

Leaguer Shenzhen MicroElectron  vs.  Shandong Sanyuan Biotechnology

Leaguer Shenzhen Mic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leaguer Shenzhen MicroElectronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Leaguer Shenzhen sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Sanyuan Bio

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Leaguer Shenzhen and Shandong Sanyuan

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

The idea behind Leaguer Shenzhen MicroElectronics and Shandong Sanyuan Biotechnology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.