Correlation Between Shenzhen Overseas and Jiangsu Pacific

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

By analyzing existing cross correlation between Shenzhen Overseas Chinese and Jiangsu Pacific Quartz, you can compare the effects of market volatilities on Shenzhen Overseas and Jiangsu Pacific 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 Overseas with a short position of Jiangsu Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Overseas and Jiangsu Pacific.

Diversification Opportunities for Shenzhen Overseas and Jiangsu Pacific

0.9

Correlation Coefficient

Shenzhen Overseas  Jiangsu Pacific

Almost no diversification

The 3 months correlation between Shenzhen and Jiangsu is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Overseas Chinese and Jiangsu Pacific Quartz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Pacific Quartz and Shenzhen Overseas 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 Overseas Chinese are associated (or correlated) with Jiangsu Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Pacific Quartz has no effect on the direction of Shenzhen Overseas i.e., Shenzhen Overseas and Jiangsu Pacific go up and down completely randomly.

Pair Corralation between Shenzhen Overseas and Jiangsu Pacific

Assuming the 90 days trading horizon Shenzhen Overseas Chinese is expected to generate 1.5 times more return on investment than Jiangsu Pacific. However, Shenzhen Overseas is 1.5 times more volatile than Jiangsu Pacific Quartz. It trades about 0.01 of its potential returns per unit of risk. Jiangsu Pacific Quartz is currently generating about -0.07 per unit of risk. If you would invest  294.00  in Shenzhen Overseas Chinese on September 21, 2024 and sell it today you would lose (1.00) from holding Shenzhen Overseas Chinese or give up 0.34% of portfolio value over 90 days.

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

Shenzhen Overseas Chinese  vs.  Jiangsu Pacific Quartz

Shenzhen Overseas Chinese

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Overseas Chinese are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Overseas sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Pacific Quartz

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Pacific Quartz are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Pacific sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Overseas and Jiangsu Pacific

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

The idea behind Shenzhen Overseas Chinese and Jiangsu Pacific Quartz 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.