Correlation Between Shenzhen Coship and Kunshan Guoli

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

Diversification Opportunities for Shenzhen Coship and Kunshan Guoli

-0.62

Correlation Coefficient

Shenzhen Coship  Kunshan Guoli

Excellent diversification

The 3 months correlation between Shenzhen and Kunshan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Coship Electronics and Kunshan Guoli Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunshan Guoli Electronic 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 Kunshan Guoli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunshan Guoli Electronic has no effect on the direction of Shenzhen Coship i.e., Shenzhen Coship and Kunshan Guoli go up and down completely randomly.

Pair Corralation between Shenzhen Coship and Kunshan Guoli

Assuming the 90 days trading horizon Shenzhen Coship Electronics is expected to generate 1.76 times more return on investment than Kunshan Guoli. However, Shenzhen Coship is 1.76 times more volatile than Kunshan Guoli Electronic. It trades about 0.25 of its potential returns per unit of risk. Kunshan Guoli Electronic is currently generating about -0.16 per unit of risk. If you would invest  427.00  in Shenzhen Coship Electronics on October 21, 2024 and sell it today you would earn a total of  213.00  from holding Shenzhen Coship Electronics or generate 49.88% return on investment over 90 days.

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

Shenzhen Coship Electronics  vs.  Kunshan Guoli Electronic

Shenzhen Coship Elec

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 22 (%) 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.

Kunshan Guoli Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kunshan Guoli Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Coship and Kunshan Guoli

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

The idea behind Shenzhen Coship Electronics and Kunshan Guoli Electronic 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.