Correlation Between Shenzhen Agricultural and Chengdu Kanghua

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

Diversification Opportunities for Shenzhen Agricultural and Chengdu Kanghua

-0.49

Correlation Coefficient

Shenzhen Agricultural  Chengdu Kanghua

Very good diversification

The 3 months correlation between Shenzhen and Chengdu is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Chengdu Kanghua Biological in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Kanghua Biol 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 Chengdu Kanghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Kanghua Biol has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Chengdu Kanghua go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Chengdu Kanghua

If you would invest (100.00) in Chengdu Kanghua Biological on October 5, 2024 and sell it today you would earn a total of  100.00  from holding Chengdu Kanghua Biological or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Shenzhen Agricultural Products  vs.  Chengdu Kanghua Biological

Shenzhen Agricultural

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Shenzhen Agricultural Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chengdu Kanghua Biol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chengdu Kanghua Biological 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.

Pair Trading with Shenzhen Agricultural and Chengdu Kanghua

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

The idea behind Shenzhen Agricultural Products and Chengdu Kanghua Biological 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.