Correlation Between Xiandai Investment and Shenzhen Fortune

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

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

Diversification Opportunities for Xiandai Investment and Shenzhen Fortune

0.76

Correlation Coefficient

Xiandai Investment  Shenzhen Fortune

Poor diversification

The 3 months correlation between Xiandai and Shenzhen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xiandai Investment Co and Shenzhen Fortune Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Fortune Trend and Xiandai Investment 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 Xiandai Investment Co are associated (or correlated) with Shenzhen Fortune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Fortune Trend has no effect on the direction of Xiandai Investment i.e., Xiandai Investment and Shenzhen Fortune go up and down completely randomly.

Pair Corralation between Xiandai Investment and Shenzhen Fortune

Assuming the 90 days trading horizon Xiandai Investment Co is expected to generate 0.35 times more return on investment than Shenzhen Fortune. However, Xiandai Investment Co is 2.88 times less risky than Shenzhen Fortune. It trades about -0.05 of its potential returns per unit of risk. Shenzhen Fortune Trend is currently generating about -0.15 per unit of risk. If you would invest  443.00  in Xiandai Investment Co on December 26, 2024 and sell it today you would lose (15.00) from holding Xiandai Investment Co or give up 3.39% of portfolio value over 90 days.

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

Xiandai Investment Co  vs.  Shenzhen Fortune Trend

Xiandai Investment

Risk-Adjusted Performance

Very Weak

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

Shenzhen Fortune Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Fortune Trend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xiandai Investment and Shenzhen Fortune

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

The idea behind Xiandai Investment Co and Shenzhen Fortune Trend 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.