Correlation Between Shenzhen SDG and Tongding Interconnection

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

By analyzing existing cross correlation between Shenzhen SDG Information and Tongding Interconnection Information, you can compare the effects of market volatilities on Shenzhen SDG and Tongding Interconnection 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 SDG with a short position of Tongding Interconnection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen SDG and Tongding Interconnection.

Diversification Opportunities for Shenzhen SDG and Tongding Interconnection

0.95

Correlation Coefficient

Shenzhen SDG  Tongding Interconnection

Almost no diversification

The 3 months correlation between Shenzhen and Tongding is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and Tongding Interconnection Infor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongding Interconnection and Shenzhen SDG 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 SDG Information are associated (or correlated) with Tongding Interconnection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongding Interconnection has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Tongding Interconnection go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Tongding Interconnection

Assuming the 90 days trading horizon Shenzhen SDG is expected to generate 1.04 times less return on investment than Tongding Interconnection. But when comparing it to its historical volatility, Shenzhen SDG Information is 1.08 times less risky than Tongding Interconnection. It trades about 0.27 of its potential returns per unit of risk. Tongding Interconnection Information is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Tongding Interconnection Information on September 4, 2024 and sell it today you would earn a total of  155.00  from holding Tongding Interconnection Information or generate 49.21% return on investment over 90 days.

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

Shenzhen SDG Information  vs.  Tongding Interconnection Infor

Shenzhen SDG Information

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen SDG sustained solid returns over the last few months and may actually be approaching a breakup point.

Tongding Interconnection

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tongding Interconnection Information are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongding Interconnection sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen SDG and Tongding Interconnection

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

The idea behind Shenzhen SDG Information and Tongding Interconnection Information 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..