Correlation Between Shenzhen Coship and Anhui Tongguan

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

Diversification Opportunities for Shenzhen Coship and Anhui Tongguan

-0.3

Correlation Coefficient

Shenzhen Coship  Anhui Tongguan

Very good diversification

The 3 months correlation between Shenzhen and Anhui is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Anhui Tongguan Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Tongguan Copper 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 Anhui Tongguan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Tongguan Copper has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Anhui Tongguan go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Anhui Tongguan

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 1.35 times more return on investment than Anhui Tongguan. However, Shenzhen Coship is 1.35 times more volatile than Anhui Tongguan Copper. It trades about 0.25 of its potential returns per unit of risk. Anhui Tongguan Copper is currently generating about 0.04 per unit of risk. If you would invest  360.00  in Shenzhen Coship Electronics on October 24, 2024 and sell it today you would earn a total of  290.00  from holding Shenzhen Coship Electronics or generate 80.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shenzhen Coship Electronics  vs.  Anhui Tongguan Copper

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.

Anhui Tongguan Copper

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Tongguan Copper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Tongguan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Coship and Anhui Tongguan

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

The idea behind Shenzhen Coship Electronics and Anhui Tongguan Copper 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..