Correlation Between Shenzhen Coship and YiDong Electronics

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

Diversification Opportunities for Shenzhen Coship and YiDong Electronics

0.69

Correlation Coefficient

Shenzhen Coship  YiDong Electronics

Poor diversification

The 3 months correlation between Shenzhen and YiDong is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and YiDong Electronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YiDong Electronics 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 YiDong Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YiDong Electronics has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and YiDong Electronics go up and down completely randomly.

Pair Corralation between Shenzhen Coship and YiDong Electronics

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 0.91 times more return on investment than YiDong Electronics. However, Shenzhen Coship Electronics is 1.1 times less risky than YiDong Electronics. It trades about 0.13 of its potential returns per unit of risk. YiDong Electronics Technology is currently generating about 0.02 per unit of risk. If you would invest  186.00  in Shenzhen Coship Electronics on October 5, 2024 and sell it today you would earn a total of  435.00  from holding Shenzhen Coship Electronics or generate 233.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.34%
Values	Daily Returns

Shenzhen Coship Electronics  vs.  YiDong Electronics Technology

Shenzhen Coship Elec

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 34 (%) 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.

YiDong Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YiDong Electronics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, YiDong Electronics 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 YiDong Electronics

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

The idea behind Shenzhen Coship Electronics and YiDong Electronics Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.