Correlation Between Shenzhen SDG and Universal Scientific

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

Diversification Opportunities for Shenzhen SDG and Universal Scientific

0.8

Correlation Coefficient

Shenzhen SDG  Universal Scientific

Very poor diversification

The 3 months correlation between Shenzhen and Universal is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and Universal Scientific Industria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Scientific 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 Universal Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Scientific has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Universal Scientific go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Universal Scientific

Assuming the 90 days trading horizon Shenzhen SDG is expected to generate 1.3 times less return on investment than Universal Scientific. But when comparing it to its historical volatility, Shenzhen SDG Information is 1.35 times less risky than Universal Scientific. It trades about 0.06 of its potential returns per unit of risk. Universal Scientific Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,593  in Universal Scientific Industrial on December 26, 2024 and sell it today you would earn a total of  102.00  from holding Universal Scientific Industrial or generate 6.4% return on investment over 90 days.

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

Shenzhen SDG Information  vs.  Universal Scientific Industria

Shenzhen SDG Information

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen SDG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Universal Scientific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Scientific Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Universal Scientific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen SDG and Universal Scientific

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

The idea behind Shenzhen SDG Information and Universal Scientific Industrial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.