Correlation Between Shantou Wanshun and Dongguan Tarry

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Can any of the company-specific risk be diversified away by investing in both Shantou Wanshun and Dongguan Tarry 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 Shantou Wanshun and Dongguan Tarry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shantou Wanshun Package and Dongguan Tarry Electronics, you can compare the effects of market volatilities on Shantou Wanshun and Dongguan Tarry 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 Shantou Wanshun with a short position of Dongguan Tarry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Dongguan Tarry.

Diversification Opportunities for Shantou Wanshun and Dongguan Tarry

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Shantou and Dongguan is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Dongguan Tarry Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Tarry Elect and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Dongguan Tarry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Tarry Elect has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Dongguan Tarry go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Dongguan Tarry

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the Dongguan Tarry. But the stock apears to be less risky and, when comparing its historical volatility, Shantou Wanshun Package is 1.37 times less risky than Dongguan Tarry. The stock trades about -0.22 of its potential returns per unit of risk. The Dongguan Tarry Electronics is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  7,418  in Dongguan Tarry Electronics on October 30, 2024 and sell it today you would lose (515.00) from holding Dongguan Tarry Electronics or give up 6.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Shantou Wanshun Package  vs.  Dongguan Tarry Electronics

 Performance 
       Timeline  
Shantou Wanshun Package 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Dongguan Tarry Elect 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dongguan Tarry Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongguan Tarry sustained solid returns over the last few months and may actually be approaching a breakup point.

Shantou Wanshun and Dongguan Tarry Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shantou Wanshun and Dongguan Tarry

The main advantage of trading using opposite Shantou Wanshun and Dongguan Tarry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shantou Wanshun position performs unexpectedly, Dongguan Tarry 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 Dongguan Tarry will offset losses from the drop in Dongguan Tarry's long position.
The idea behind Shantou Wanshun Package and Dongguan Tarry Electronics 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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