Correlation Between Shenwan Hongyuan and China Satellite

Can any of the company-specific risk be diversified away by investing in both Shenwan Hongyuan and China Satellite 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 Shenwan Hongyuan and China Satellite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenwan Hongyuan Group and China Satellite Communications, you can compare the effects of market volatilities on Shenwan Hongyuan and China Satellite 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 Shenwan Hongyuan with a short position of China Satellite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenwan Hongyuan and China Satellite.

Diversification Opportunities for Shenwan Hongyuan and China Satellite

0.48

Correlation Coefficient

Shenwan Hongyuan  China Satellite

Very weak diversification

The 3 months correlation between Shenwan and China is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Shenwan Hongyuan Group and China Satellite Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Satellite Comm and Shenwan Hongyuan 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 Shenwan Hongyuan Group are associated (or correlated) with China Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Satellite Comm has no effect on the direction of Shenwan Hongyuan i.e., Shenwan Hongyuan and China Satellite go up and down completely randomly.

Pair Corralation between Shenwan Hongyuan and China Satellite

Assuming the 90 days trading horizon Shenwan Hongyuan Group is expected to generate 0.6 times more return on investment than China Satellite. However, Shenwan Hongyuan Group is 1.67 times less risky than China Satellite. It trades about -0.03 of its potential returns per unit of risk. China Satellite Communications is currently generating about -0.16 per unit of risk. If you would invest  542.00  in Shenwan Hongyuan Group on October 4, 2024 and sell it today you would lose (7.00) from holding Shenwan Hongyuan Group or give up 1.29% of portfolio value over 90 days.

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

Shenwan Hongyuan Group  vs.  China Satellite Communications

Shenwan Hongyuan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenwan Hongyuan Group 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.

China Satellite Comm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Satellite Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Satellite sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenwan Hongyuan and China Satellite

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

The idea behind Shenwan Hongyuan Group and China Satellite Communications 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.