Correlation Between Shenzhen Coship and Huasi Agricultural

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

Diversification Opportunities for Shenzhen Coship and Huasi Agricultural

0.77

Correlation Coefficient

Shenzhen Coship  Huasi Agricultural

Poor diversification

The 3 months correlation between Shenzhen and Huasi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural 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 Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Huasi Agricultural

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 1.21 times more return on investment than Huasi Agricultural. However, Shenzhen Coship is 1.21 times more volatile than Huasi Agricultural Development. It trades about 0.33 of its potential returns per unit of risk. Huasi Agricultural Development is currently generating about 0.02 per unit of risk. If you would invest  357.00  in Shenzhen Coship Electronics on October 6, 2024 and sell it today you would earn a total of  264.00  from holding Shenzhen Coship Electronics or generate 73.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Shenzhen Coship Electronics  vs.  Huasi Agricultural Development

Shenzhen Coship Elec

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 35 (%) 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.

Huasi Agricultural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Coship and Huasi Agricultural

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

The idea behind Shenzhen Coship Electronics and Huasi Agricultural 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.