Correlation Between Shenzhen Clou and Shengtak New

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

Diversification Opportunities for Shenzhen Clou and Shengtak New

0.44

Correlation Coefficient

Shenzhen Clou  Shengtak New

Very weak diversification

The 3 months correlation between Shenzhen and Shengtak is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and Shengtak New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengtak New Material 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 Shengtak New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengtak New Material has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and Shengtak New go up and down completely randomly.

Pair Corralation between Shenzhen Clou and Shengtak New

Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to under-perform the Shengtak New. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Clou Electronics is 1.33 times less risky than Shengtak New. The stock trades about -0.04 of its potential returns per unit of risk. The Shengtak New Material is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Shengtak New Material on December 26, 2024 and sell it today you would earn a total of  518.00  from holding Shengtak New Material or generate 16.41% return on investment over 90 days.

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

Shenzhen Clou Electronics  vs.  Shengtak New Material

Shenzhen Clou Electronics

Risk-Adjusted Performance

Very Weak

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

Shengtak New Material

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shengtak New Material are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shengtak New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Clou and Shengtak New

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

The idea behind Shenzhen Clou Electronics and Shengtak New Material 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.