Correlation Between Shenzhen SDG and AUPU Home

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

Diversification Opportunities for Shenzhen SDG and AUPU Home

0.53

Correlation Coefficient

Shenzhen SDG  AUPU Home

Very weak diversification

The 3 months correlation between Shenzhen and AUPU is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style 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 AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and AUPU Home go up and down completely randomly.

Pair Corralation between Shenzhen SDG and AUPU Home

Assuming the 90 days trading horizon Shenzhen SDG Information is expected to generate 1.12 times more return on investment than AUPU Home. However, Shenzhen SDG is 1.12 times more volatile than AUPU Home Style. It trades about 0.05 of its potential returns per unit of risk. AUPU Home Style is currently generating about -0.01 per unit of risk. If you would invest  608.00  in Shenzhen SDG Information on December 1, 2024 and sell it today you would earn a total of  32.00  from holding Shenzhen SDG Information or generate 5.26% return on investment over 90 days.

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

Shenzhen SDG Information  vs.  AUPU Home Style

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.

AUPU Home Style

Risk-Adjusted Performance

Very Weak

Over the last 90 days AUPU Home Style has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AUPU Home 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 AUPU Home

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

The idea behind Shenzhen SDG Information and AUPU Home Style 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.