Correlation Between Sino American and Motech Industries
Can any of the company-specific risk be diversified away by investing in both Sino American and Motech Industries 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 American and Motech Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sino American Silicon Products and Motech Industries Co, you can compare the effects of market volatilities on Sino American and Motech Industries 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 American with a short position of Motech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino American and Motech Industries.
Diversification Opportunities for Sino American and Motech Industries
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sino and Motech is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sino American Silicon Products and Motech Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motech Industries and Sino American 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 American Silicon Products are associated (or correlated) with Motech Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motech Industries has no effect on the direction of Sino American i.e., Sino American and Motech Industries go up and down completely randomly.
Pair Corralation between Sino American and Motech Industries
Assuming the 90 days trading horizon Sino American Silicon Products is expected to under-perform the Motech Industries. But the stock apears to be less risky and, when comparing its historical volatility, Sino American Silicon Products is 1.08 times less risky than Motech Industries. The stock trades about -0.39 of its potential returns per unit of risk. The Motech Industries Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,120 in Motech Industries Co on November 5, 2024 and sell it today you would lose (60.00) from holding Motech Industries Co or give up 2.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sino American Silicon Products vs. Motech Industries Co
Performance |
| Timeline |
| Sino American Silicon |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Motech Industries |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sino American and Motech Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sino American and Motech Industries
The main advantage of trading using opposite Sino American and Motech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino American position performs unexpectedly, Motech Industries 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 Motech Industries will offset losses from the drop in Motech Industries' long position.The idea behind Sino American Silicon Products and Motech Industries Co 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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