Correlation Between Shenyang Huitian and Shenzhen SDG

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Can any of the company-specific risk be diversified away by investing in both Shenyang Huitian and Shenzhen SDG 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 Shenyang Huitian and Shenzhen SDG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shenyang Huitian Thermal and Shenzhen SDG Information, you can compare the effects of market volatilities on Shenyang Huitian and Shenzhen SDG 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 Shenyang Huitian with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenyang Huitian and Shenzhen SDG.

Diversification Opportunities for Shenyang Huitian and Shenzhen SDG

ShenyangShenzhenDiversified AwayShenyangShenzhenDiversified Away100%
0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shenyang and Shenzhen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and Shenzhen SDG Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Information and Shenyang Huitian 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 Shenyang Huitian Thermal are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Information has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Shenyang Huitian and Shenzhen SDG

Assuming the 90 days trading horizon Shenyang Huitian is expected to generate 1.17 times less return on investment than Shenzhen SDG. In addition to that, Shenyang Huitian is 1.56 times more volatile than Shenzhen SDG Information. It trades about 0.01 of its total potential returns per unit of risk. Shenzhen SDG Information is currently generating about 0.01 per unit of volatility. If you would invest  547.00  in Shenzhen SDG Information on October 26, 2024 and sell it today you would earn a total of  0.00  from holding Shenzhen SDG Information or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shenyang Huitian Thermal  vs.  Shenzhen SDG Information

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 0102030
JavaScript chart by amCharts 3.21.15000692 000070
       Timeline  
Shenyang Huitian Thermal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenyang Huitian Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenyang Huitian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan3.544.5
Shenzhen SDG Information 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Modest
Over the last 90 days Shenzhen SDG Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen SDG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan5.25.45.65.866.26.4

Shenyang Huitian and Shenzhen SDG Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.1-9.06-6.02-2.990.05153.046.139.2212.3 0.010.020.030.040.050.06
JavaScript chart by amCharts 3.21.15000692 000070
       Returns  

Pair Trading with Shenyang Huitian and Shenzhen SDG

The main advantage of trading using opposite Shenyang Huitian and Shenzhen SDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenyang Huitian position performs unexpectedly, Shenzhen SDG 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 SDG will offset losses from the drop in Shenzhen SDG's long position.
The idea behind Shenyang Huitian Thermal and Shenzhen SDG Information 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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