Correlation Between Shaanxi Meineng and Shenzhen Glory

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

By analyzing existing cross correlation between Shaanxi Meineng Clean and Shenzhen Glory Medical, you can compare the effects of market volatilities on Shaanxi Meineng and Shenzhen Glory 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 Shaanxi Meineng with a short position of Shenzhen Glory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Meineng and Shenzhen Glory.

Diversification Opportunities for Shaanxi Meineng and Shenzhen Glory

0.81

Correlation Coefficient

Shaanxi Meineng  Shenzhen Glory

Very poor diversification

The 3 months correlation between Shaanxi and Shenzhen is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Meineng Clean and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical and Shaanxi Meineng 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 Shaanxi Meineng Clean are associated (or correlated) with Shenzhen Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Shaanxi Meineng i.e., Shaanxi Meineng and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Shaanxi Meineng and Shenzhen Glory

Assuming the 90 days trading horizon Shaanxi Meineng Clean is expected to generate 0.92 times more return on investment than Shenzhen Glory. However, Shaanxi Meineng Clean is 1.08 times less risky than Shenzhen Glory. It trades about -0.01 of its potential returns per unit of risk. Shenzhen Glory Medical is currently generating about -0.02 per unit of risk. If you would invest  1,502  in Shaanxi Meineng Clean on October 7, 2024 and sell it today you would lose (295.00) from holding Shaanxi Meineng Clean or give up 19.64% of portfolio value over 90 days.

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

Shaanxi Meineng Clean  vs.  Shenzhen Glory Medical

Shaanxi Meineng Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shaanxi Meineng Clean 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 Glory Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Glory Medical 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.

Pair Trading with Shaanxi Meineng and Shenzhen Glory

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

The idea behind Shaanxi Meineng Clean and Shenzhen Glory Medical 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 Transaction History module to view history of all your transactions and understand their impact on performance.