Correlation Between Shenzhen SDG and IRay Technology

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

Diversification Opportunities for Shenzhen SDG and IRay Technology

-0.26

Correlation Coefficient

Shenzhen SDG  IRay Technology

Very good diversification

The 3 months correlation between Shenzhen and IRay is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Information and iRay Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRay Technology 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 IRay Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRay Technology has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and IRay Technology go up and down completely randomly.

Pair Corralation between Shenzhen SDG and IRay Technology

Assuming the 90 days trading horizon Shenzhen SDG Information is expected to generate 1.09 times more return on investment than IRay Technology. However, Shenzhen SDG is 1.09 times more volatile than iRay Technology Co. It trades about 0.01 of its potential returns per unit of risk. iRay Technology Co is currently generating about -0.04 per unit of risk. If you would invest  695.00  in Shenzhen SDG Information on October 4, 2024 and sell it today you would lose (120.00) from holding Shenzhen SDG Information or give up 17.27% of portfolio value over 90 days.

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

Shenzhen SDG Information  vs.  iRay Technology Co

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.

iRay Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iRay Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen SDG and IRay Technology

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

The idea behind Shenzhen SDG Information and iRay Technology Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.