Correlation Between Sinocat Environmental and Huizhou Desay

Can any of the company-specific risk be diversified away by investing in both Sinocat Environmental and Huizhou Desay 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 Huizhou Desay 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 Huizhou Desay SV, you can compare the effects of market volatilities on Sinocat Environmental and Huizhou Desay 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 Huizhou Desay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinocat Environmental and Huizhou Desay.

Diversification Opportunities for Sinocat Environmental and Huizhou Desay

-0.07

Correlation Coefficient

Sinocat Environmental  Huizhou Desay

Good diversification

The 3 months correlation between Sinocat and Huizhou is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Huizhou Desay SV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Desay SV 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 Huizhou Desay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Desay SV has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Huizhou Desay go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Huizhou Desay

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to under-perform the Huizhou Desay. In addition to that, Sinocat Environmental is 1.03 times more volatile than Huizhou Desay SV. It trades about -0.02 of its total potential returns per unit of risk. Huizhou Desay SV is currently generating about 0.0 per unit of volatility. If you would invest  12,100  in Huizhou Desay SV on October 10, 2024 and sell it today you would lose (1,900) from holding Huizhou Desay SV or give up 15.7% of portfolio value over 90 days.

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

Sinocat Environmental Technolo  vs.  Huizhou Desay SV

Sinocat Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sinocat Environmental Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinocat Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Huizhou Desay SV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huizhou Desay SV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sinocat Environmental and Huizhou Desay

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

The idea behind Sinocat Environmental Technology and Huizhou Desay SV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.