Correlation Between Shenzhen Agricultural and Beijing HuaYuanYiTong

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

Diversification Opportunities for Shenzhen Agricultural and Beijing HuaYuanYiTong

0.65

Correlation Coefficient

Shenzhen Agricultural  Beijing HuaYuanYiTong

Poor diversification

The 3 months correlation between Shenzhen and Beijing is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Beijing HuaYuanYiTong Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing HuaYuanYiTong has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Beijing HuaYuanYiTong go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Beijing HuaYuanYiTong

Assuming the 90 days trading horizon Shenzhen Agricultural Products is expected to generate 0.56 times more return on investment than Beijing HuaYuanYiTong. However, Shenzhen Agricultural Products is 1.78 times less risky than Beijing HuaYuanYiTong. It trades about 0.02 of its potential returns per unit of risk. Beijing HuaYuanYiTong Thermal is currently generating about 0.01 per unit of risk. If you would invest  658.00  in Shenzhen Agricultural Products on October 3, 2024 and sell it today you would earn a total of  43.00  from holding Shenzhen Agricultural Products or generate 6.53% return on investment over 90 days.

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

Shenzhen Agricultural Products  vs.  Beijing HuaYuanYiTong Thermal

Shenzhen Agricultural

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Agricultural Products are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Beijing HuaYuanYiTong

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Beijing HuaYuanYiTong Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Beijing HuaYuanYiTong 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 Agricultural and Beijing HuaYuanYiTong

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

The idea behind Shenzhen Agricultural Products and Beijing HuaYuanYiTong Thermal 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.