Correlation Between Shenzhen SDG and CICC Fund

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

Diversification Opportunities for Shenzhen SDG and CICC Fund

0.37

Correlation Coefficient

Shenzhen SDG  CICC Fund

Weak diversification

The 3 months correlation between Shenzhen and CICC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and CICC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICC Fund Management 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 CICC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICC Fund Management has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and CICC Fund go up and down completely randomly.

Pair Corralation between Shenzhen SDG and CICC Fund

Assuming the 90 days trading horizon Shenzhen SDG Information is expected to under-perform the CICC Fund. In addition to that, Shenzhen SDG is 1.4 times more volatile than CICC Fund Management. It trades about -0.28 of its total potential returns per unit of risk. CICC Fund Management is currently generating about 0.41 per unit of volatility. If you would invest  343.00  in CICC Fund Management on October 11, 2024 and sell it today you would earn a total of  43.00  from holding CICC Fund Management or generate 12.54% return on investment over 90 days.

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

Shenzhen SDG Information  vs.  CICC Fund Management

Shenzhen SDG Information

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 11 (%) 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.

CICC Fund Management

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen SDG and CICC Fund

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

The idea behind Shenzhen SDG Information and CICC Fund Management 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.