Correlation Between China Nonferrous and Shenzhen Kexin

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

By analyzing existing cross correlation between China Nonferrous Metal and Shenzhen Kexin Communication, you can compare the effects of market volatilities on China Nonferrous and Shenzhen Kexin 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 China Nonferrous with a short position of Shenzhen Kexin. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Shenzhen Kexin.

Diversification Opportunities for China Nonferrous and Shenzhen Kexin

0.84

Correlation Coefficient

China Nonferrous  Shenzhen Kexin

Very poor diversification

The 3 months correlation between China and Shenzhen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Shenzhen Kexin Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kexin Commu and China Nonferrous 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 China Nonferrous Metal are associated (or correlated) with Shenzhen Kexin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kexin Commu has no effect on the direction of China Nonferrous i.e., China Nonferrous and Shenzhen Kexin go up and down completely randomly.

Pair Corralation between China Nonferrous and Shenzhen Kexin

Assuming the 90 days trading horizon China Nonferrous Metal is expected to generate 0.61 times more return on investment than Shenzhen Kexin. However, China Nonferrous Metal is 1.65 times less risky than Shenzhen Kexin. It trades about 0.03 of its potential returns per unit of risk. Shenzhen Kexin Communication is currently generating about 0.01 per unit of risk. If you would invest  452.00  in China Nonferrous Metal on September 25, 2024 and sell it today you would earn a total of  45.00  from holding China Nonferrous Metal or generate 9.96% return on investment over 90 days.

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

China Nonferrous Metal  vs.  Shenzhen Kexin Communication

China Nonferrous Metal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Nonferrous Metal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Kexin Commu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kexin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Nonferrous and Shenzhen Kexin

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

The idea behind China Nonferrous Metal and Shenzhen Kexin Communication 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.