Correlation Between Shenzhen Centralcon and Guangzhou Zhujiang

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

Diversification Opportunities for Shenzhen Centralcon and Guangzhou Zhujiang

0.74

Correlation Coefficient

Shenzhen Centralcon  Guangzhou Zhujiang

Poor diversification

The 3 months correlation between Shenzhen and Guangzhou is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Centralcon Investment and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang 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 Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Shenzhen Centralcon i.e., Shenzhen Centralcon and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Shenzhen Centralcon and Guangzhou Zhujiang

Assuming the 90 days trading horizon Shenzhen Centralcon Investment is expected to generate 1.54 times more return on investment than Guangzhou Zhujiang. However, Shenzhen Centralcon is 1.54 times more volatile than Guangzhou Zhujiang Brewery. It trades about 0.25 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.14 per unit of risk. If you would invest  359.00  in Shenzhen Centralcon Investment on September 14, 2024 and sell it today you would earn a total of  228.00  from holding Shenzhen Centralcon Investment or generate 63.51% 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.  Guangzhou Zhujiang Brewery

Shenzhen Centralcon

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Centralcon Investment are ranked lower than 19 (%) 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.

Guangzhou Zhujiang

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Zhujiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Centralcon and Guangzhou Zhujiang

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

The idea behind Shenzhen Centralcon Investment and Guangzhou Zhujiang Brewery 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.