Correlation Between Sao Ta and Mechanics Construction

Can any of the company-specific risk be diversified away by investing in both Sao Ta and Mechanics Construction 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 Sao Ta and Mechanics Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Ta Foods and Mechanics Construction and, you can compare the effects of market volatilities on Sao Ta and Mechanics Construction 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 Sao Ta with a short position of Mechanics Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and Mechanics Construction.

Diversification Opportunities for Sao Ta and Mechanics Construction

-0.38

Correlation Coefficient

Sao Ta  Mechanics Construction

Very good diversification

The 3 months correlation between Sao and Mechanics is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Mechanics Construction and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechanics Construction and Sao Ta 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 Sao Ta Foods are associated (or correlated) with Mechanics Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechanics Construction has no effect on the direction of Sao Ta i.e., Sao Ta and Mechanics Construction go up and down completely randomly.

Pair Corralation between Sao Ta and Mechanics Construction

Assuming the 90 days trading horizon Sao Ta Foods is expected to generate 0.65 times more return on investment than Mechanics Construction. However, Sao Ta Foods is 1.53 times less risky than Mechanics Construction. It trades about 0.03 of its potential returns per unit of risk. Mechanics Construction and is currently generating about -0.01 per unit of risk. If you would invest  4,650,000  in Sao Ta Foods on September 16, 2024 and sell it today you would earn a total of  75,000  from holding Sao Ta Foods or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.24%
Values	Daily Returns

Sao Ta Foods  vs.  Mechanics Construction and

Sao Ta Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mechanics Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mechanics Construction and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Mechanics Construction is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sao Ta and Mechanics Construction

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

The idea behind Sao Ta Foods and Mechanics Construction and 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.