Correlation Between Shenyang Huitian and Shenzhen Silver

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

Diversification Opportunities for Shenyang Huitian and Shenzhen Silver

0.31

Correlation Coefficient

Shenyang Huitian  Shenzhen Silver

Weak diversification

The 3 months correlation between Shenyang and Shenzhen is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Shenyang Huitian Thermal and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis 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 Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Shenyang Huitian i.e., Shenyang Huitian and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Shenyang Huitian and Shenzhen Silver

Assuming the 90 days trading horizon Shenyang Huitian Thermal is expected to generate about the same return on investment as Shenzhen Silver Basis. But, Shenyang Huitian Thermal is 1.77 times less risky than Shenzhen Silver. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about 0.0 per unit of risk. If you would invest  973.00  in Shenzhen Silver Basis on December 26, 2024 and sell it today you would lose (31.00) from holding Shenzhen Silver Basis or give up 3.19% of portfolio value over 90 days.

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

Shenyang Huitian Thermal  vs.  Shenzhen Silver Basis

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 Silver Basis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Silver Basis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Silver 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 Silver

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

The idea behind Shenyang Huitian Thermal and Shenzhen Silver Basis 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.