Correlation Between Bohai Leasing and Shenzhen Glory

Can any of the company-specific risk be diversified away by investing in both Bohai Leasing and Shenzhen Glory 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 Bohai Leasing and Shenzhen Glory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bohai Leasing Co and Shenzhen Glory Medical, you can compare the effects of market volatilities on Bohai Leasing and Shenzhen Glory 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 Bohai Leasing with a short position of Shenzhen Glory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohai Leasing and Shenzhen Glory.

Diversification Opportunities for Bohai Leasing and Shenzhen Glory

0.66

Correlation Coefficient

Bohai Leasing  Shenzhen Glory

Poor diversification

The 3 months correlation between Bohai and Shenzhen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bohai Leasing Co and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical and Bohai Leasing 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 Bohai Leasing Co are associated (or correlated) with Shenzhen Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Bohai Leasing i.e., Bohai Leasing and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Bohai Leasing and Shenzhen Glory

Assuming the 90 days trading horizon Bohai Leasing Co is expected to generate 0.98 times more return on investment than Shenzhen Glory. However, Bohai Leasing Co is 1.02 times less risky than Shenzhen Glory. It trades about 0.08 of its potential returns per unit of risk. Shenzhen Glory Medical is currently generating about -0.02 per unit of risk. If you would invest  205.00  in Bohai Leasing Co on October 9, 2024 and sell it today you would earn a total of  146.00  from holding Bohai Leasing Co or generate 71.22% return on investment over 90 days.

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

Bohai Leasing Co  vs.  Shenzhen Glory Medical

Bohai Leasing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bohai Leasing Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bohai Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Glory Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Glory Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Glory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bohai Leasing and Shenzhen Glory

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

The idea behind Bohai Leasing Co and Shenzhen Glory Medical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.