Correlation Between Sinocat Environmental and Zhangzhou Pientzehuang

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

Diversification Opportunities for Sinocat Environmental and Zhangzhou Pientzehuang

-0.3

Correlation Coefficient

Sinocat Environmental  Zhangzhou Pientzehuang

Very good diversification

The 3 months correlation between Sinocat and Zhangzhou is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Zhangzhou Pientzehuang Pharmac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangzhou Pientzehuang 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 Zhangzhou Pientzehuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangzhou Pientzehuang has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Zhangzhou Pientzehuang go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Zhangzhou Pientzehuang

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to under-perform the Zhangzhou Pientzehuang. In addition to that, Sinocat Environmental is 4.68 times more volatile than Zhangzhou Pientzehuang Pharmaceutical. It trades about -0.18 of its total potential returns per unit of risk. Zhangzhou Pientzehuang Pharmaceutical is currently generating about -0.35 per unit of volatility. If you would invest  22,603  in Zhangzhou Pientzehuang Pharmaceutical on October 5, 2024 and sell it today you would lose (1,697) from holding Zhangzhou Pientzehuang Pharmaceutical or give up 7.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sinocat Environmental Technolo  vs.  Zhangzhou Pientzehuang Pharmac

Sinocat Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhangzhou Pientzehuang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhangzhou Pientzehuang Pharmaceutical 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 Zhangzhou Pientzehuang

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

The idea behind Sinocat Environmental Technology and Zhangzhou Pientzehuang Pharmaceutical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.