Correlation Between Shui Mu and Victory New

Can any of the company-specific risk be diversified away by investing in both Shui Mu and Victory New 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 Shui Mu and Victory New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shui Mu International Co and Victory New Materials, you can compare the effects of market volatilities on Shui Mu and Victory New 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 Shui Mu with a short position of Victory New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shui Mu and Victory New.

Diversification Opportunities for Shui Mu and Victory New

0.15

Correlation Coefficient

Shui Mu  Victory New

Average diversification

The 3 months correlation between Shui and Victory is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Shui Mu International Co and Victory New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory New Materials and Shui Mu 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 Shui Mu International Co are associated (or correlated) with Victory New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory New Materials has no effect on the direction of Shui Mu i.e., Shui Mu and Victory New go up and down completely randomly.

Pair Corralation between Shui Mu and Victory New

Assuming the 90 days trading horizon Shui Mu International Co is expected to generate 0.6 times more return on investment than Victory New. However, Shui Mu International Co is 1.68 times less risky than Victory New. It trades about 0.02 of its potential returns per unit of risk. Victory New Materials is currently generating about -0.01 per unit of risk. If you would invest  1,120  in Shui Mu International Co on December 5, 2024 and sell it today you would earn a total of  75.00  from holding Shui Mu International Co or generate 6.7% return on investment over 90 days.

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

Shui Mu International Co  vs.  Victory New Materials

Shui Mu International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shui Mu International Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shui Mu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Victory New Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Shui Mu and Victory New

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

The idea behind Shui Mu International Co and Victory New 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.