Correlation Between Shenzhen SDG and Beijing Roborock

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

Diversification Opportunities for Shenzhen SDG and Beijing Roborock

0.49

Correlation Coefficient

Shenzhen SDG  Beijing Roborock

Very weak diversification

The 3 months correlation between Shenzhen and Beijing is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and Beijing Roborock Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Roborock Tec 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 Beijing Roborock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Roborock Tec has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Beijing Roborock go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Beijing Roborock

Assuming the 90 days trading horizon Shenzhen SDG is expected to generate 1.15 times less return on investment than Beijing Roborock. But when comparing it to its historical volatility, Shenzhen SDG Information is 1.27 times less risky than Beijing Roborock. It trades about 0.07 of its potential returns per unit of risk. Beijing Roborock Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  21,780  in Beijing Roborock Technology on December 4, 2024 and sell it today you would earn a total of  1,696  from holding Beijing Roborock Technology or generate 7.79% 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.  Beijing Roborock Technology

Shenzhen SDG Information

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 5 (%) 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.

Beijing Roborock Tec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Roborock Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Roborock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shenzhen SDG and Beijing Roborock

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

The idea behind Shenzhen SDG Information and Beijing Roborock Technology 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.