Correlation Between Shan Loong and Maxigen Biotech
Can any of the company-specific risk be diversified away by investing in both Shan Loong and Maxigen Biotech 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 Shan Loong and Maxigen Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shan Loong Transportation Co and Maxigen Biotech, you can compare the effects of market volatilities on Shan Loong and Maxigen Biotech 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 Shan Loong with a short position of Maxigen Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Loong and Maxigen Biotech.
Diversification Opportunities for Shan Loong and Maxigen Biotech
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Shan and Maxigen is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and Maxigen Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxigen Biotech and Shan Loong 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 Shan Loong Transportation Co are associated (or correlated) with Maxigen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxigen Biotech has no effect on the direction of Shan Loong i.e., Shan Loong and Maxigen Biotech go up and down completely randomly.
Pair Corralation between Shan Loong and Maxigen Biotech
Assuming the 90 days trading horizon Shan Loong is expected to generate 1.09 times less return on investment than Maxigen Biotech. But when comparing it to its historical volatility, Shan Loong Transportation Co is 1.56 times less risky than Maxigen Biotech. It trades about 0.12 of its potential returns per unit of risk. Maxigen Biotech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,900 in Maxigen Biotech on November 3, 2024 and sell it today you would earn a total of 130.00 from holding Maxigen Biotech or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shan Loong Transportation Co vs. Maxigen Biotech
Performance |
| Timeline |
| Shan Loong Transport |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Maxigen Biotech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Shan Loong and Maxigen Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shan Loong and Maxigen Biotech
The main advantage of trading using opposite Shan Loong and Maxigen Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shan Loong position performs unexpectedly, Maxigen Biotech 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 Maxigen Biotech will offset losses from the drop in Maxigen Biotech's long position.The idea behind Shan Loong Transportation Co and Maxigen Biotech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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