Correlation Between Shenzhen Clou and Sinomine Resource

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

By analyzing existing cross correlation between Shenzhen Clou Electronics and Sinomine Resource Exploration, you can compare the effects of market volatilities on Shenzhen Clou and Sinomine Resource 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 Clou with a short position of Sinomine Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Clou and Sinomine Resource.

Diversification Opportunities for Shenzhen Clou and Sinomine Resource

0.76

Correlation Coefficient

Shenzhen Clou  Sinomine Resource

Poor diversification

The 3 months correlation between Shenzhen and Sinomine is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and Sinomine Resource Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomine Resource and Shenzhen Clou 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 Clou Electronics are associated (or correlated) with Sinomine Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomine Resource has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and Sinomine Resource go up and down completely randomly.

Pair Corralation between Shenzhen Clou and Sinomine Resource

Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to under-perform the Sinomine Resource. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Clou Electronics is 1.1 times less risky than Sinomine Resource. The stock trades about -0.05 of its potential returns per unit of risk. The Sinomine Resource Exploration is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,344  in Sinomine Resource Exploration on September 30, 2024 and sell it today you would lose (1,674) from holding Sinomine Resource Exploration or give up 31.32% of portfolio value over 90 days.

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

Shenzhen Clou Electronics  vs.  Sinomine Resource Exploration

Shenzhen Clou Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Clou Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Clou may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sinomine Resource

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomine Resource Exploration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinomine Resource 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 Clou and Sinomine Resource

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

The idea behind Shenzhen Clou Electronics and Sinomine Resource Exploration 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.