Correlation Between Shenzhen Clou and Fujian Oriental

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

Diversification Opportunities for Shenzhen Clou and Fujian Oriental

0.17

Correlation Coefficient

Shenzhen Clou  Fujian Oriental

Average diversification

The 3 months correlation between Shenzhen and Fujian is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Clou Electronics and Fujian Oriental Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Oriental Silver 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 Fujian Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Oriental Silver has no effect on the direction of Shenzhen Clou i.e., Shenzhen Clou and Fujian Oriental go up and down completely randomly.

Pair Corralation between Shenzhen Clou and Fujian Oriental

Assuming the 90 days trading horizon Shenzhen Clou Electronics is expected to generate 1.29 times more return on investment than Fujian Oriental. However, Shenzhen Clou is 1.29 times more volatile than Fujian Oriental Silver. It trades about -0.21 of its potential returns per unit of risk. Fujian Oriental Silver is currently generating about -0.37 per unit of risk. If you would invest  501.00  in Shenzhen Clou Electronics on October 11, 2024 and sell it today you would lose (86.00) from holding Shenzhen Clou Electronics or give up 17.17% of portfolio value over 90 days.

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

Shenzhen Clou Electronics  vs.  Fujian Oriental Silver

Shenzhen Clou Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Clou Electronics are ranked lower than 2 (%) 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 February 2025.

Fujian Oriental Silver

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Shenzhen Clou Electronics and Fujian Oriental Silver 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.