Correlation Between Hunan TV and Shenzhen RoadRover

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

By analyzing existing cross correlation between Hunan TV Broadcast and Shenzhen RoadRover Technology, you can compare the effects of market volatilities on Hunan TV and Shenzhen RoadRover 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 Hunan TV with a short position of Shenzhen RoadRover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Shenzhen RoadRover.

Diversification Opportunities for Hunan TV and Shenzhen RoadRover

0.64

Correlation Coefficient

Hunan TV  Shenzhen RoadRover

Poor diversification

The 3 months correlation between Hunan and Shenzhen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Shenzhen RoadRover Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen RoadRover and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Shenzhen RoadRover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen RoadRover has no effect on the direction of Hunan TV i.e., Hunan TV and Shenzhen RoadRover go up and down completely randomly.

Pair Corralation between Hunan TV and Shenzhen RoadRover

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to generate 1.22 times more return on investment than Shenzhen RoadRover. However, Hunan TV is 1.22 times more volatile than Shenzhen RoadRover Technology. It trades about 0.14 of its potential returns per unit of risk. Shenzhen RoadRover Technology is currently generating about -0.07 per unit of risk. If you would invest  753.00  in Hunan TV Broadcast on September 19, 2024 and sell it today you would earn a total of  57.00  from holding Hunan TV Broadcast or generate 7.57% return on investment over 90 days.

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

Hunan TV Broadcast  vs.  Shenzhen RoadRover Technology

Hunan TV Broadcast

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen RoadRover

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen RoadRover Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen RoadRover sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan TV and Shenzhen RoadRover

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

The idea behind Hunan TV Broadcast and Shenzhen RoadRover Technology 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.