Correlation Between Shenzhen Coship and Changchun

Can any of the company-specific risk be diversified away by investing in both Shenzhen Coship and Changchun 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 Changchun 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 Changchun UP Optotech, you can compare the effects of market volatilities on Shenzhen Coship and Changchun 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 Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Coship and Changchun.

Diversification Opportunities for Shenzhen Coship and Changchun

-0.56

Correlation Coefficient

Shenzhen Coship  Changchun

Excellent diversification

The 3 months correlation between Shenzhen and Changchun is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech 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 Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Changchun go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Changchun

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 1.11 times more return on investment than Changchun. However, Shenzhen Coship is 1.11 times more volatile than Changchun UP Optotech. It trades about 0.24 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about 0.05 per unit of risk. If you would invest  378.00  in Shenzhen Coship Electronics on October 25, 2024 and sell it today you would earn a total of  288.00  from holding Shenzhen Coship Electronics or generate 76.19% 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.  Changchun UP Optotech

Shenzhen Coship Elec

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Coship sustained solid returns over the last few months and may actually be approaching a breakup point.

Changchun UP Optotech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Coship and Changchun

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

The idea behind Shenzhen Coship Electronics and Changchun UP Optotech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.