Correlation Between Shenzhen Shenbao and Anhui Jinhe

Can any of the company-specific risk be diversified away by investing in both Shenzhen Shenbao and Anhui Jinhe 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 Shenzhen Shenbao and Anhui Jinhe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Shenbao Industrial and Anhui Jinhe Industrial, you can compare the effects of market volatilities on Shenzhen Shenbao and Anhui Jinhe 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 Shenzhen Shenbao with a short position of Anhui Jinhe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Shenbao and Anhui Jinhe.

Diversification Opportunities for Shenzhen Shenbao and Anhui Jinhe

-0.07

Correlation Coefficient

Shenzhen Shenbao  Anhui Jinhe

Good diversification

The 3 months correlation between Shenzhen and Anhui is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Shenbao Industrial and Anhui Jinhe Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Jinhe Industrial and Shenzhen Shenbao 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 Shenzhen Shenbao Industrial are associated (or correlated) with Anhui Jinhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Jinhe Industrial has no effect on the direction of Shenzhen Shenbao i.e., Shenzhen Shenbao and Anhui Jinhe go up and down completely randomly.

Pair Corralation between Shenzhen Shenbao and Anhui Jinhe

Assuming the 90 days trading horizon Shenzhen Shenbao Industrial is expected to under-perform the Anhui Jinhe. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Shenbao Industrial is 1.59 times less risky than Anhui Jinhe. The stock trades about -0.02 of its potential returns per unit of risk. The Anhui Jinhe Industrial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,305  in Anhui Jinhe Industrial on December 25, 2024 and sell it today you would earn a total of  258.00  from holding Anhui Jinhe Industrial or generate 11.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Shenzhen Shenbao Industrial  vs.  Anhui Jinhe Industrial

Shenzhen Shenbao Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Shenbao Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Shenbao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Jinhe Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jinhe Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Jinhe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Shenbao and Anhui Jinhe

The main advantage of trading using opposite Shenzhen Shenbao and Anhui Jinhe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Shenbao position performs unexpectedly, Anhui Jinhe 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 Anhui Jinhe will offset losses from the drop in Anhui Jinhe's long position.

The idea behind Shenzhen Shenbao Industrial and Anhui Jinhe Industrial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.