Correlation Between Shenzhen Centralcon and Zhongshan Broad-Ocean

Can any of the company-specific risk be diversified away by investing in both Shenzhen Centralcon 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 Centralcon 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 Centralcon Investment and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on Shenzhen Centralcon 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 Centralcon with a short position of Zhongshan Broad-Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Centralcon and Zhongshan Broad-Ocean.

Diversification Opportunities for Shenzhen Centralcon and Zhongshan Broad-Ocean

0.65

Correlation Coefficient

Shenzhen Centralcon  Zhongshan Broad-Ocean

Poor diversification

The 3 months correlation between Shenzhen and Zhongshan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Centralcon Investment 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 Centralcon 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 Centralcon Investment 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 Centralcon i.e., Shenzhen Centralcon and Zhongshan Broad-Ocean go up and down completely randomly.

Pair Corralation between Shenzhen Centralcon and Zhongshan Broad-Ocean

Assuming the 90 days trading horizon Shenzhen Centralcon Investment is expected to generate 1.24 times more return on investment than Zhongshan Broad-Ocean. However, Shenzhen Centralcon is 1.24 times more volatile than Zhongshan Broad Ocean Motor. It trades about 0.18 of its potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.13 per unit of risk. If you would invest  458.00  in Shenzhen Centralcon Investment on December 28, 2024 and sell it today you would earn a total of  182.00  from holding Shenzhen Centralcon Investment or generate 39.74% return on investment over 90 days.

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

Shenzhen Centralcon Investment  vs.  Zhongshan Broad Ocean Motor

Shenzhen Centralcon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Centralcon Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Centralcon sustained solid returns over the last few months and may actually be approaching a breakup point.

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 10 (%) 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 Centralcon and Zhongshan Broad-Ocean

The main advantage of trading using opposite Shenzhen Centralcon and Zhongshan Broad-Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Centralcon 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 Centralcon Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.