Correlation Between Shenzhen Agricultural and Jiangsu Broadcasting

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

Diversification Opportunities for Shenzhen Agricultural and Jiangsu Broadcasting

0.89

Correlation Coefficient

Shenzhen Agricultural  Jiangsu Broadcasting

Very poor diversification

The 3 months correlation between Shenzhen and Jiangsu is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Jiangsu Broadcasting Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Broadcasting 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 Jiangsu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Broadcasting has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Jiangsu Broadcasting go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Jiangsu Broadcasting

Assuming the 90 days trading horizon Shenzhen Agricultural Products is expected to generate 0.96 times more return on investment than Jiangsu Broadcasting. However, Shenzhen Agricultural Products is 1.04 times less risky than Jiangsu Broadcasting. It trades about -0.37 of its potential returns per unit of risk. Jiangsu Broadcasting Cable is currently generating about -0.54 per unit of risk. If you would invest  769.00  in Shenzhen Agricultural Products on October 7, 2024 and sell it today you would lose (105.00) from holding Shenzhen Agricultural Products or give up 13.65% of portfolio value over 90 days.

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

Shenzhen Agricultural Products  vs.  Jiangsu Broadcasting Cable

Shenzhen Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Jiangsu Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Broadcasting Cable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shenzhen Agricultural and Jiangsu Broadcasting

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

The idea behind Shenzhen Agricultural Products and Jiangsu Broadcasting Cable 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.