Correlation Between Bengang Steel and Shenzhen MYS

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

By analyzing existing cross correlation between Bengang Steel Plates and Shenzhen MYS Environmental, you can compare the effects of market volatilities on Bengang Steel and Shenzhen MYS 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 Bengang Steel with a short position of Shenzhen MYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and Shenzhen MYS.

Diversification Opportunities for Bengang Steel and Shenzhen MYS

0.71

Correlation Coefficient

Bengang Steel  Shenzhen MYS

Poor diversification

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

Pair Corralation between Bengang Steel and Shenzhen MYS

Assuming the 90 days trading horizon Bengang Steel Plates is expected to generate 0.59 times more return on investment than Shenzhen MYS. However, Bengang Steel Plates is 1.69 times less risky than Shenzhen MYS. It trades about -0.02 of its potential returns per unit of risk. Shenzhen MYS Environmental is currently generating about -0.11 per unit of risk. If you would invest  340.00  in Bengang Steel Plates on September 24, 2024 and sell it today you would lose (5.00) from holding Bengang Steel Plates or give up 1.47% of portfolio value over 90 days.

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

Bengang Steel Plates  vs.  Shenzhen MYS Environmental

Bengang Steel Plates

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen MYS Environ

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bengang Steel and Shenzhen MYS

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

The idea behind Bengang Steel Plates and Shenzhen MYS Environmental 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.