Correlation Between Shenzhen Kaifa and Zhongshan Broad-Ocean

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

By analyzing existing cross correlation between Shenzhen Kaifa Technology and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on Shenzhen Kaifa and Zhongshan Broad-Ocean 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 Kaifa with a short position of Zhongshan Broad-Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Kaifa and Zhongshan Broad-Ocean.

Diversification Opportunities for Shenzhen Kaifa and Zhongshan Broad-Ocean

0.5

Correlation Coefficient

Shenzhen Kaifa  Zhongshan Broad-Ocean

Very weak diversification

The 3 months correlation between Shenzhen and Zhongshan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kaifa Technology and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Shenzhen Kaifa 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 Kaifa Technology are associated (or correlated) with Zhongshan Broad-Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Shenzhen Kaifa i.e., Shenzhen Kaifa and Zhongshan Broad-Ocean go up and down completely randomly.

Pair Corralation between Shenzhen Kaifa and Zhongshan Broad-Ocean

Assuming the 90 days trading horizon Shenzhen Kaifa Technology is expected to under-perform the Zhongshan Broad-Ocean. In addition to that, Shenzhen Kaifa is 1.03 times more volatile than Zhongshan Broad Ocean Motor. It trades about -0.03 of its total potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.12 per unit of volatility. If you would invest  583.00  in Zhongshan Broad Ocean Motor on December 26, 2024 and sell it today you would earn a total of  99.00  from holding Zhongshan Broad Ocean Motor or generate 16.98% return on investment over 90 days.

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

Shenzhen Kaifa Technology  vs.  Zhongshan Broad Ocean Motor

Shenzhen Kaifa Technology

Risk-Adjusted Performance

Very Weak

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

Zhongshan Broad Ocean

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad-Ocean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Kaifa and Zhongshan Broad-Ocean

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

The idea behind Shenzhen Kaifa Technology and Zhongshan Broad Ocean Motor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.