Correlation Between Sino AG and ROHM Co
Can any of the company-specific risk be diversified away by investing in both Sino AG and ROHM Co 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 ROHM Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sino AG and ROHM Co, you can compare the effects of market volatilities on Sino AG and ROHM Co 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 ROHM Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino AG and ROHM Co.
Diversification Opportunities for Sino AG and ROHM Co
Poor diversification
The 3 months correlation between Sino and ROHM is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sino AG and ROHM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROHM Co 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 ROHM Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROHM Co has no effect on the direction of Sino AG i.e., Sino AG and ROHM Co go up and down completely randomly.
Pair Corralation between Sino AG and ROHM Co
Assuming the 90 days horizon Sino AG is expected to generate 2.62 times less return on investment than ROHM Co. But when comparing it to its historical volatility, Sino AG is 1.37 times less risky than ROHM Co. It trades about 0.14 of its potential returns per unit of risk. ROHM Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 742.00 in ROHM Co on April 22, 2025 and sell it today you would earn a total of 333.00 from holding ROHM Co or generate 44.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sino AG vs. ROHM Co
Performance |
| Timeline |
| Sino AG |
| ROHM Co |
Sino AG and ROHM Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sino AG and ROHM Co
The main advantage of trading using opposite Sino AG and ROHM Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino AG position performs unexpectedly, ROHM Co 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 ROHM Co will offset losses from the drop in ROHM Co's long position.| Alphabet vs. Sino AG | ||
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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Sino AG as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Sino AG's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Sino AG's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Sino AG.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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