Correlation Between Sino AG and China Overseas

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

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

Diversification Opportunities for Sino AG and China Overseas

-0.73

Correlation Coefficient

Sino AG  China Overseas

Pay attention - limited upside

The 3 months correlation between Sino and China is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sino AG and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land 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 China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Sino AG i.e., Sino AG and China Overseas go up and down completely randomly.

Pair Corralation between Sino AG and China Overseas

Assuming the 90 days horizon Sino AG is expected to generate 0.96 times more return on investment than China Overseas. However, Sino AG is 1.04 times less risky than China Overseas. It trades about 0.22 of its potential returns per unit of risk. China Overseas Land is currently generating about -0.16 per unit of risk. If you would invest  6,550  in Sino AG on October 11, 2024 and sell it today you would earn a total of  550.00  from holding Sino AG or generate 8.4% return on investment over 90 days.

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

Sino AG  vs.  China Overseas Land

Sino AG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sino AG are ranked lower than 20 (%) 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.

China Overseas Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sino AG and China Overseas

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

The idea behind Sino AG and China Overseas Land 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.