Correlation Between Sinocat Environmental and Anhui Estone

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

Diversification Opportunities for Sinocat Environmental and Anhui Estone

0.84

Correlation Coefficient

Sinocat Environmental  Anhui Estone

Very poor diversification

The 3 months correlation between Sinocat and Anhui is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sinocat Environmental Technolo and Anhui Estone Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Estone Materials 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 Anhui Estone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Estone Materials has no effect on the direction of Sinocat Environmental i.e., Sinocat Environmental and Anhui Estone go up and down completely randomly.

Pair Corralation between Sinocat Environmental and Anhui Estone

Assuming the 90 days trading horizon Sinocat Environmental is expected to generate 1.22 times less return on investment than Anhui Estone. But when comparing it to its historical volatility, Sinocat Environmental Technology is 1.19 times less risky than Anhui Estone. It trades about 0.04 of its potential returns per unit of risk. Anhui Estone Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,810  in Anhui Estone Materials on October 24, 2024 and sell it today you would earn a total of  110.00  from holding Anhui Estone Materials or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Sinocat Environmental Technolo  vs.  Anhui Estone Materials

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.

Anhui Estone Materials

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Sinocat Environmental and Anhui Estone

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

The idea behind Sinocat Environmental Technology and Anhui Estone Materials 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.