Correlation Between San Neng and Ruentex Development

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

Diversification Opportunities for San Neng and Ruentex Development

0.73
  Correlation Coefficient

Poor diversification

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

Pair Corralation between San Neng and Ruentex Development

Assuming the 90 days trading horizon San Neng is expected to generate 2.64 times less return on investment than Ruentex Development. But when comparing it to its historical volatility, San Neng Group is 2.61 times less risky than Ruentex Development. It trades about 0.06 of its potential returns per unit of risk. Ruentex Development Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,580  in Ruentex Development Co on September 14, 2024 and sell it today you would earn a total of  1,040  from holding Ruentex Development Co or generate 29.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.62%
ValuesDaily Returns

San Neng Group  vs.  Ruentex Development Co

 Performance 
       Timeline  
San Neng Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days San Neng Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, San Neng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Ruentex Development 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

San Neng and Ruentex Development Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with San Neng and Ruentex Development

The main advantage of trading using opposite San Neng and Ruentex Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Neng position performs unexpectedly, Ruentex Development 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 Ruentex Development will offset losses from the drop in Ruentex Development's long position.
The idea behind San Neng Group and Ruentex Development 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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