Correlation Between Shenzhen Coship and Hengli Industrial

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

By analyzing existing cross correlation between Shenzhen Coship Electronics and Hengli Industrial Development, you can compare the effects of market volatilities on Shenzhen Coship and Hengli Industrial 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 Shenzhen Coship with a short position of Hengli Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Coship and Hengli Industrial.

Diversification Opportunities for Shenzhen Coship and Hengli Industrial

-0.52

Correlation Coefficient

Shenzhen Coship  Hengli Industrial

Excellent diversification

The 3 months correlation between Shenzhen and Hengli is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial and Shenzhen Coship 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 Shenzhen Coship Electronics are associated (or correlated) with Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Hengli Industrial go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Hengli Industrial

Assuming the 90 days trading horizon Shenzhen Coship is expected to generate 10.31 times less return on investment than Hengli Industrial. In addition to that, Shenzhen Coship is 1.24 times more volatile than Hengli Industrial Development. It trades about 0.01 of its total potential returns per unit of risk. Hengli Industrial Development is currently generating about 0.17 per unit of volatility. If you would invest  204.00  in Hengli Industrial Development on December 27, 2024 and sell it today you would earn a total of  69.00  from holding Hengli Industrial Development or generate 33.82% return on investment over 90 days.

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

Shenzhen Coship Electronics  vs.  Hengli Industrial Development

Shenzhen Coship Elec

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Coship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hengli Industrial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Coship and Hengli Industrial

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

The idea behind Shenzhen Coship Electronics and Hengli Industrial Development 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.