Correlation Between Great China and S Tech

Can any of the company-specific risk be diversified away by investing in both Great China and S Tech 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 Great China and S Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great China Metal and S Tech Corp, you can compare the effects of market volatilities on Great China and S Tech 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 Great China with a short position of S Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and S Tech.

Diversification Opportunities for Great China and S Tech

0.14

Correlation Coefficient

Great China  S Tech

Average diversification

The 3 months correlation between Great and 1584 is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and S Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Tech Corp and Great China 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 Great China Metal are associated (or correlated) with S Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Tech Corp has no effect on the direction of Great China i.e., Great China and S Tech go up and down completely randomly.

Pair Corralation between Great China and S Tech

Assuming the 90 days trading horizon Great China Metal is expected to generate 0.23 times more return on investment than S Tech. However, Great China Metal is 4.29 times less risky than S Tech. It trades about 0.02 of its potential returns per unit of risk. S Tech Corp is currently generating about -0.2 per unit of risk. If you would invest  2,295  in Great China Metal on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Great China Metal or generate 0.44% return on investment over 90 days.

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

Great China Metal  vs.  S Tech Corp

Great China Metal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great China Metal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great China is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

S Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days S Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Great China and S Tech

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

The idea behind Great China Metal and S Tech Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.