Correlation Between Shenzhen Centralcon and Wuhan Yangtze

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

Diversification Opportunities for Shenzhen Centralcon and Wuhan Yangtze

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Shenzhen and Wuhan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Centralcon Investment and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun 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 Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Shenzhen Centralcon i.e., Shenzhen Centralcon and Wuhan Yangtze go up and down completely randomly.

Pair Corralation between Shenzhen Centralcon and Wuhan Yangtze

Assuming the 90 days trading horizon Shenzhen Centralcon Investment is expected to under-perform the Wuhan Yangtze. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Centralcon Investment is 1.09 times less risky than Wuhan Yangtze. The stock trades about -0.03 of its potential returns per unit of risk. The Wuhan Yangtze Communication is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,708  in Wuhan Yangtze Communication on October 14, 2024 and sell it today you would earn a total of  354.00  from holding Wuhan Yangtze Communication or generate 20.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Shenzhen Centralcon Investment  vs.  Wuhan Yangtze Communication

 Performance 
       Timeline  
Shenzhen Centralcon 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 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.
Wuhan Yangtze Commun 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Centralcon and Wuhan Yangtze Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen Centralcon and Wuhan Yangtze

The main advantage of trading using opposite Shenzhen Centralcon and Wuhan Yangtze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Centralcon position performs unexpectedly, Wuhan Yangtze 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 Wuhan Yangtze will offset losses from the drop in Wuhan Yangtze's long position.
The idea behind Shenzhen Centralcon Investment and Wuhan Yangtze Communication 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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