Correlation Between Sinocat Environmental and Huaxia Fund

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

Diversification Opportunities for Sinocat Environmental and Huaxia Fund

0.39

Correlation Coefficient

Sinocat Environmental  Huaxia Fund

Weak diversification

The 3 months correlation between Sinocat and Huaxia is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Huaxia Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Fund Management 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 Huaxia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Fund Management has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Huaxia Fund go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Huaxia Fund

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to under-perform the Huaxia Fund. In addition to that, Sinocat Environmental is 2.81 times more volatile than Huaxia Fund Management. It trades about -0.37 of its total potential returns per unit of risk. Huaxia Fund Management is currently generating about 0.34 per unit of volatility. If you would invest  270.00  in Huaxia Fund Management on October 11, 2024 and sell it today you would earn a total of  30.00  from holding Huaxia Fund Management or generate 11.11% return on investment over 90 days.

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

Sinocat Environmental Technolo  vs.  Huaxia Fund Management

Sinocat Environmental

Risk-Adjusted Performance

5 of 100

Insignificant

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.

Huaxia Fund Management

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Sinocat Environmental and Huaxia Fund

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

The idea behind Sinocat Environmental Technology and Huaxia Fund Management 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.