Correlation Between Shenzhen Coship and Changjiang Publishing

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

Diversification Opportunities for Shenzhen Coship and Changjiang Publishing

0.42

Correlation Coefficient

Shenzhen Coship  Changjiang Publishing

Very weak diversification

The 3 months correlation between Shenzhen and Changjiang is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Changjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Publishing 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 Changjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Publishing has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Changjiang Publishing go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Changjiang Publishing

Assuming the 90 days trading horizon Shenzhen Coship is expected to generate 1.04 times less return on investment than Changjiang Publishing. In addition to that, Shenzhen Coship is 1.95 times more volatile than Changjiang Publishing Media. It trades about 0.09 of its total potential returns per unit of risk. Changjiang Publishing Media is currently generating about 0.19 per unit of volatility. If you would invest  854.00  in Changjiang Publishing Media on October 6, 2024 and sell it today you would earn a total of  76.00  from holding Changjiang Publishing Media or generate 8.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Shenzhen Coship Electronics  vs.  Changjiang Publishing Media

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.

Changjiang Publishing

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Shenzhen Coship Electronics and Changjiang Publishing Media 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.