Correlation Between Sparta Capital and China Finance

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

By analyzing existing cross correlation between Sparta Capital and China Finance Online, you can compare the effects of market volatilities on Sparta Capital and China Finance 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 Sparta Capital with a short position of China Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and China Finance.

Diversification Opportunities for Sparta Capital and China Finance

0.0

Correlation Coefficient

Sparta Capital  China Finance

Pay attention - limited upside

The 3 months correlation between Sparta and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and China Finance Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Finance Online and Sparta Capital 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 Sparta Capital are associated (or correlated) with China Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Finance Online has no effect on the direction of Sparta Capital i.e., Sparta Capital and China Finance go up and down completely randomly.

Pair Corralation between Sparta Capital and China Finance

Assuming the 90 days horizon Sparta Capital is expected to generate 12.86 times less return on investment than China Finance. But when comparing it to its historical volatility, Sparta Capital is 6.48 times less risky than China Finance. It trades about 0.03 of its potential returns per unit of risk. China Finance Online is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.01  in China Finance Online on September 19, 2024 and sell it today you would earn a total of  0.00  from holding China Finance Online or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

Sparta Capital  vs.  China Finance Online

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Finance Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Finance Online has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, China Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sparta Capital and China Finance

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

The idea behind Sparta Capital and China Finance Online 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.