Correlation Between Shenzhen Agricultural and Gemdale Corp

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

Diversification Opportunities for Shenzhen Agricultural and Gemdale Corp

0.12

Correlation Coefficient

Shenzhen Agricultural  Gemdale Corp

Average diversification

The 3 months correlation between Shenzhen and Gemdale is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Gemdale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemdale Corp 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 Gemdale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemdale Corp has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Gemdale Corp go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Gemdale Corp

Assuming the 90 days trading horizon Shenzhen Agricultural Products is expected to generate 0.73 times more return on investment than Gemdale Corp. However, Shenzhen Agricultural Products is 1.36 times less risky than Gemdale Corp. It trades about 0.05 of its potential returns per unit of risk. Gemdale Corp is currently generating about -0.1 per unit of risk. If you would invest  631.00  in Shenzhen Agricultural Products on October 23, 2024 and sell it today you would earn a total of  33.00  from holding Shenzhen Agricultural Products or generate 5.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shenzhen Agricultural Products  vs.  Gemdale Corp

Shenzhen Agricultural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Agricultural Products are ranked lower than 3 (%) 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.

Gemdale Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemdale Corp 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 Gemdale Corp

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

The idea behind Shenzhen Agricultural Products and Gemdale Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.