Correlation Between Shenyang Huitian and Shenzhen Coship

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

Diversification Opportunities for Shenyang Huitian and Shenzhen Coship

0.13

Correlation Coefficient

Shenyang Huitian  Shenzhen Coship

Average diversification

The 3 months correlation between Shenyang and Shenzhen is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and Shenzhen Coship Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Coship Elec 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 Coship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Coship Elec has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and Shenzhen Coship go up and down completely randomly.

Pair Corralation between Shenyang Huitian and Shenzhen Coship

Assuming the 90 days trading horizon Shenyang Huitian Thermal is expected to under-perform the Shenzhen Coship. But the stock apears to be less risky and, when comparing its historical volatility, Shenyang Huitian Thermal is 2.25 times less risky than Shenzhen Coship. The stock trades about -0.02 of its potential returns per unit of risk. The Shenzhen Coship Electronics is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  669.00  in Shenzhen Coship Electronics on December 27, 2024 and sell it today you would lose (45.00) from holding Shenzhen Coship Electronics or give up 6.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Shenyang Huitian Thermal  vs.  Shenzhen Coship Electronics

Shenyang Huitian Thermal

Risk-Adjusted Performance

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.

Shenzhen Coship Elec

Risk-Adjusted Performance

Weak

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

Pair Trading with Shenyang Huitian and Shenzhen Coship

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

The idea behind Shenyang Huitian Thermal and Shenzhen Coship Electronics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.