Correlation Between Shenzhen Coship and Guangzhou Zhujiang

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

Diversification Opportunities for Shenzhen Coship and Guangzhou Zhujiang

0.45

Correlation Coefficient

Shenzhen Coship  Guangzhou Zhujiang

Very weak diversification

The 3 months correlation between Shenzhen and Guangzhou is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang 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 Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Guangzhou Zhujiang

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 2.05 times more return on investment than Guangzhou Zhujiang. However, Shenzhen Coship is 2.05 times more volatile than Guangzhou Zhujiang Brewery. It trades about 0.09 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.03 per unit of risk. If you would invest  193.00  in Shenzhen Coship Electronics on October 23, 2024 and sell it today you would earn a total of  452.00  from holding Shenzhen Coship Electronics or generate 234.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

Shenzhen Coship Electronics  vs.  Guangzhou Zhujiang Brewery

Shenzhen Coship Elec

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 20 (%) 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.

Guangzhou Zhujiang

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen Coship and Guangzhou Zhujiang

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

The idea behind Shenzhen Coship Electronics and Guangzhou Zhujiang Brewery 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.