Correlation Between Shenzhen Centralcon and Shandong Rike

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

Diversification Opportunities for Shenzhen Centralcon and Shandong Rike

0.39

Correlation Coefficient

Shenzhen Centralcon  Shandong Rike

Weak diversification

The 3 months correlation between Shenzhen and Shandong is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Centralcon Investment and Shandong Rike Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Rike Chemical 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 Shandong Rike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Rike Chemical has no effect on the direction of Shenzhen Centralcon i.e., Shenzhen Centralcon and Shandong Rike go up and down completely randomly.

Pair Corralation between Shenzhen Centralcon and Shandong Rike

Assuming the 90 days trading horizon Shenzhen Centralcon Investment is expected to under-perform the Shandong Rike. In addition to that, Shenzhen Centralcon is 1.21 times more volatile than Shandong Rike Chemical. It trades about -0.03 of its total potential returns per unit of risk. Shandong Rike Chemical is currently generating about 0.0 per unit of volatility. If you would invest  685.00  in Shandong Rike Chemical on October 24, 2024 and sell it today you would lose (119.00) from holding Shandong Rike Chemical or give up 17.37% of portfolio value over 90 days.

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

Shenzhen Centralcon Investment  vs.  Shandong Rike Chemical

Shenzhen Centralcon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Centralcon Investment 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.

Shandong Rike Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Rike Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Rike is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Centralcon and Shandong Rike

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

The idea behind Shenzhen Centralcon Investment and Shandong Rike Chemical 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.