Correlation Between Wuliangye Yibin and Shenzhen Transsion

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

By analyzing existing cross correlation between Wuliangye Yibin Co and Shenzhen Transsion Holdings, you can compare the effects of market volatilities on Wuliangye Yibin and Shenzhen Transsion 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 Wuliangye Yibin with a short position of Shenzhen Transsion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuliangye Yibin and Shenzhen Transsion.

Diversification Opportunities for Wuliangye Yibin and Shenzhen Transsion

-0.43

Correlation Coefficient

Wuliangye Yibin  Shenzhen Transsion

Very good diversification

The 3 months correlation between Wuliangye and Shenzhen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wuliangye Yibin Co and Shenzhen Transsion Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Transsion and Wuliangye Yibin 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 Wuliangye Yibin Co are associated (or correlated) with Shenzhen Transsion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Transsion has no effect on the direction of Wuliangye Yibin i.e., Wuliangye Yibin and Shenzhen Transsion go up and down completely randomly.

Pair Corralation between Wuliangye Yibin and Shenzhen Transsion

Assuming the 90 days trading horizon Wuliangye Yibin Co is expected to under-perform the Shenzhen Transsion. But the stock apears to be less risky and, when comparing its historical volatility, Wuliangye Yibin Co is 1.94 times less risky than Shenzhen Transsion. The stock trades about -0.03 of its potential returns per unit of risk. The Shenzhen Transsion Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,302  in Shenzhen Transsion Holdings on December 2, 2024 and sell it today you would lose (33.00) from holding Shenzhen Transsion Holdings or give up 0.35% of portfolio value over 90 days.

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

Wuliangye Yibin Co  vs.  Shenzhen Transsion Holdings

Wuliangye Yibin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wuliangye Yibin Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Transsion

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Wuliangye Yibin and Shenzhen Transsion

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

The idea behind Wuliangye Yibin Co and Shenzhen Transsion Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.