Correlation Between Shenzhen SDG and Fujian Longzhou

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

Diversification Opportunities for Shenzhen SDG and Fujian Longzhou

0.79

Correlation Coefficient

Shenzhen SDG  Fujian Longzhou

Poor diversification

The 3 months correlation between Shenzhen and Fujian is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran 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 Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Fujian Longzhou

Assuming the 90 days trading horizon Shenzhen SDG Information is expected to generate 0.65 times more return on investment than Fujian Longzhou. However, Shenzhen SDG Information is 1.54 times less risky than Fujian Longzhou. It trades about 0.13 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.0 per unit of risk. If you would invest  474.00  in Shenzhen SDG Information on October 3, 2024 and sell it today you would earn a total of  101.00  from holding Shenzhen SDG Information or generate 21.31% return on investment over 90 days.

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

Shenzhen SDG Information  vs.  Fujian Longzhou Transportation

Shenzhen SDG Information

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 10 (%) 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.

Fujian Longzhou Tran

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen SDG and Fujian Longzhou

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

The idea behind Shenzhen SDG Information and Fujian Longzhou Transportation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.