Correlation Between Sinocat Environmental and Gem Year

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

Diversification Opportunities for Sinocat Environmental and Gem Year

0.72

Correlation Coefficient

Sinocat Environmental  Gem Year

Poor diversification

The 3 months correlation between Sinocat and Gem is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Gem Year Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Year Industrial 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 Gem Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Year Industrial has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Gem Year go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Gem Year

Assuming the 90 days trading horizon Sinocat Environmental Technology is expected to under-perform the Gem Year. In addition to that, Sinocat Environmental is 2.16 times more volatile than Gem Year Industrial Co. It trades about -0.24 of its total potential returns per unit of risk. Gem Year Industrial Co is currently generating about -0.31 per unit of volatility. If you would invest  474.00  in Gem Year Industrial Co on October 6, 2024 and sell it today you would lose (65.00) from holding Gem Year Industrial Co or give up 13.71% of portfolio value over 90 days.

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

Sinocat Environmental Technolo  vs.  Gem Year Industrial Co

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.

Gem Year Industrial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gem Year Industrial Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gem Year may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sinocat Environmental and Gem Year

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

The idea behind Sinocat Environmental Technology and Gem Year Industrial Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.