Correlation Between Sino AG and Bridgestone

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

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

Diversification Opportunities for Sino AG and Bridgestone

0.8

Correlation Coefficient

Sino AG  Bridgestone

Very poor diversification

The 3 months correlation between Sino and Bridgestone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sino AG and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone and Sino AG 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 Sino AG are associated (or correlated) with Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Sino AG i.e., Sino AG and Bridgestone go up and down completely randomly.

Pair Corralation between Sino AG and Bridgestone

Assuming the 90 days horizon Sino AG is expected to generate 1.5 times more return on investment than Bridgestone. However, Sino AG is 1.5 times more volatile than Bridgestone. It trades about 0.25 of its potential returns per unit of risk. Bridgestone is currently generating about 0.18 per unit of risk. If you would invest  6,450  in Sino AG on December 30, 2024 and sell it today you would earn a total of  2,900  from holding Sino AG or generate 44.96% return on investment over 90 days.

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

Sino AG  vs.  Bridgestone

Sino AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sino AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sino AG reported solid returns over the last few months and may actually be approaching a breakup point.

Bridgestone

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgestone are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bridgestone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sino AG and Bridgestone

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

The idea behind Sino AG and Bridgestone 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.