Correlation Between Sunwave Communications and Shenzhen Shenbao

Can any of the company-specific risk be diversified away by investing in both Sunwave Communications and Shenzhen Shenbao 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 Sunwave Communications and Shenzhen Shenbao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunwave Communications Co and Shenzhen Shenbao Industrial, you can compare the effects of market volatilities on Sunwave Communications and Shenzhen Shenbao 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 Sunwave Communications with a short position of Shenzhen Shenbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunwave Communications and Shenzhen Shenbao.

Diversification Opportunities for Sunwave Communications and Shenzhen Shenbao

0.71

Correlation Coefficient

Sunwave Communications  Shenzhen Shenbao

Poor diversification

The 3 months correlation between Sunwave and Shenzhen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sunwave Communications Co and Shenzhen Shenbao Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Shenbao Ind and Sunwave Communications 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 Sunwave Communications Co are associated (or correlated) with Shenzhen Shenbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Shenbao Ind has no effect on the direction of Sunwave Communications i.e., Sunwave Communications and Shenzhen Shenbao go up and down completely randomly.

Pair Corralation between Sunwave Communications and Shenzhen Shenbao

Assuming the 90 days trading horizon Sunwave Communications Co is expected to generate 3.76 times more return on investment than Shenzhen Shenbao. However, Sunwave Communications is 3.76 times more volatile than Shenzhen Shenbao Industrial. It trades about 0.09 of its potential returns per unit of risk. Shenzhen Shenbao Industrial is currently generating about 0.0 per unit of risk. If you would invest  735.00  in Sunwave Communications Co on December 25, 2024 and sell it today you would earn a total of  142.00  from holding Sunwave Communications Co or generate 19.32% return on investment over 90 days.

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

Sunwave Communications Co  vs.  Shenzhen Shenbao Industrial

Sunwave Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunwave Communications Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sunwave Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Shenbao Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Shenbao Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Shenbao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sunwave Communications and Shenzhen Shenbao

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

The idea behind Sunwave Communications Co and Shenzhen Shenbao Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.