Correlation Between Shenzhen Agricultural and Shanghai 2345

Can any of the company-specific risk be diversified away by investing in both Shenzhen Agricultural and Shanghai 2345 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 Agricultural and Shanghai 2345 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Agricultural Products and Shanghai 2345 Network, you can compare the effects of market volatilities on Shenzhen Agricultural and Shanghai 2345 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 Agricultural with a short position of Shanghai 2345. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Agricultural and Shanghai 2345.

Diversification Opportunities for Shenzhen Agricultural and Shanghai 2345

0.91

Correlation Coefficient

Shenzhen Agricultural  Shanghai 2345

Almost no diversification

The 3 months correlation between Shenzhen and Shanghai is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Shanghai 2345 Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai 2345 Network and Shenzhen Agricultural 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 Agricultural Products are associated (or correlated) with Shanghai 2345. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai 2345 Network has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Shanghai 2345 go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Shanghai 2345

Assuming the 90 days trading horizon Shenzhen Agricultural is expected to generate 3.87 times less return on investment than Shanghai 2345. But when comparing it to its historical volatility, Shenzhen Agricultural Products is 3.15 times less risky than Shanghai 2345. It trades about 0.3 of its potential returns per unit of risk. Shanghai 2345 Network is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Shanghai 2345 Network on September 19, 2024 and sell it today you would earn a total of  179.00  from holding Shanghai 2345 Network or generate 58.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Shenzhen Agricultural Products  vs.  Shanghai 2345 Network

Shenzhen Agricultural

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Agricultural Products are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai 2345 Network

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai 2345 Network are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai 2345 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Agricultural and Shanghai 2345

The main advantage of trading using opposite Shenzhen Agricultural and Shanghai 2345 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Agricultural position performs unexpectedly, Shanghai 2345 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 Shanghai 2345 will offset losses from the drop in Shanghai 2345's long position.

The idea behind Shenzhen Agricultural Products and Shanghai 2345 Network 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.