Correlation Between Sinocat Environmental and Shenzhen Silver

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

By analyzing existing cross correlation between Sinocat Environmental Technology and Shenzhen Silver Basis, you can compare the effects of market volatilities on Sinocat Environmental and Shenzhen Silver 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 Sinocat Environmental with a short position of Shenzhen Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocat Environmental and Shenzhen Silver.

Diversification Opportunities for Sinocat Environmental and Shenzhen Silver

0.83

Correlation Coefficient

Sinocat Environmental  Shenzhen Silver

Very poor diversification

The 3 months correlation between Sinocat and Shenzhen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Sinocat Environmental 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 Sinocat Environmental Technology are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Shenzhen Silver

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to generate 1.04 times more return on investment than Shenzhen Silver. However, Sinocat Environmental is 1.04 times more volatile than Shenzhen Silver Basis. It trades about 0.06 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about 0.0 per unit of risk. If you would invest  1,808  in Sinocat Environmental Technology on December 25, 2024 and sell it today you would earn a total of  174.00  from holding Sinocat Environmental Technology or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Sinocat Environmental Technolo  vs.  Shenzhen Silver Basis

Sinocat Environmental

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Silver Basis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Silver Basis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Silver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sinocat Environmental and Shenzhen Silver

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

The idea behind Sinocat Environmental Technology and Shenzhen Silver Basis 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.