Correlation Between Shenzhen Shenbao and Huaneng Lancang

Can any of the company-specific risk be diversified away by investing in both Shenzhen Shenbao and Huaneng Lancang 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 Huaneng Lancang 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 Huaneng Lancang River, you can compare the effects of market volatilities on Shenzhen Shenbao and Huaneng Lancang 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 Huaneng Lancang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Shenbao and Huaneng Lancang.

Diversification Opportunities for Shenzhen Shenbao and Huaneng Lancang

-0.46

Correlation Coefficient

Shenzhen Shenbao  Huaneng Lancang

Very good diversification

The 3 months correlation between Shenzhen and Huaneng is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Shenbao Industrial and Huaneng Lancang River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Lancang River 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 Huaneng Lancang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Lancang River has no effect on the direction of Shenzhen Shenbao i.e., Shenzhen Shenbao and Huaneng Lancang go up and down completely randomly.

Pair Corralation between Shenzhen Shenbao and Huaneng Lancang

Assuming the 90 days trading horizon Shenzhen Shenbao Industrial is expected to under-perform the Huaneng Lancang. In addition to that, Shenzhen Shenbao is 1.45 times more volatile than Huaneng Lancang River. It trades about -0.27 of its total potential returns per unit of risk. Huaneng Lancang River is currently generating about -0.06 per unit of volatility. If you would invest  941.00  in Huaneng Lancang River on October 6, 2024 and sell it today you would lose (17.00) from holding Huaneng Lancang River or give up 1.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Shenzhen Shenbao Industrial  vs.  Huaneng Lancang River

Shenzhen Shenbao Ind

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Huaneng Lancang River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaneng Lancang River 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.

Pair Trading with Shenzhen Shenbao and Huaneng Lancang

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

The idea behind Shenzhen Shenbao Industrial and Huaneng Lancang River 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.