Correlation Between Shanghai Newtouch and Sino Medical

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

By analyzing existing cross correlation between Shanghai Newtouch Software and Sino Medical Sciences, you can compare the effects of market volatilities on Shanghai Newtouch and Sino Medical 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 Shanghai Newtouch with a short position of Sino Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Newtouch and Sino Medical.

Diversification Opportunities for Shanghai Newtouch and Sino Medical

0.53

Correlation Coefficient

Shanghai Newtouch  Sino Medical

Very weak diversification

The 3 months correlation between Shanghai and Sino is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Newtouch Software and Sino Medical Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Medical Sciences and Shanghai Newtouch 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 Shanghai Newtouch Software are associated (or correlated) with Sino Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Medical Sciences has no effect on the direction of Shanghai Newtouch i.e., Shanghai Newtouch and Sino Medical go up and down completely randomly.

Pair Corralation between Shanghai Newtouch and Sino Medical

Assuming the 90 days trading horizon Shanghai Newtouch Software is expected to under-perform the Sino Medical. In addition to that, Shanghai Newtouch is 1.91 times more volatile than Sino Medical Sciences. It trades about -0.33 of its total potential returns per unit of risk. Sino Medical Sciences is currently generating about -0.38 per unit of volatility. If you would invest  1,100  in Sino Medical Sciences on October 12, 2024 and sell it today you would lose (170.00) from holding Sino Medical Sciences or give up 15.45% of portfolio value over 90 days.

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

Shanghai Newtouch Software  vs.  Sino Medical Sciences

Shanghai Newtouch

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Newtouch Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Newtouch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sino Medical Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sino Medical Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shanghai Newtouch and Sino Medical

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

The idea behind Shanghai Newtouch Software and Sino Medical Sciences 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.