Correlation Between Shenzhen Hifuture and Jiangsu Xinning

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

By analyzing existing cross correlation between Shenzhen Hifuture Electric and Jiangsu Xinning Modern, you can compare the effects of market volatilities on Shenzhen Hifuture and Jiangsu Xinning 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 Hifuture with a short position of Jiangsu Xinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Hifuture and Jiangsu Xinning.

Diversification Opportunities for Shenzhen Hifuture and Jiangsu Xinning

0.74

Correlation Coefficient

Shenzhen Hifuture  Jiangsu Xinning

Poor diversification

The 3 months correlation between Shenzhen and Jiangsu is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Hifuture Electric and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern and Shenzhen Hifuture 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 Hifuture Electric are associated (or correlated) with Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Shenzhen Hifuture i.e., Shenzhen Hifuture and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Shenzhen Hifuture and Jiangsu Xinning

Assuming the 90 days trading horizon Shenzhen Hifuture Electric is expected to under-perform the Jiangsu Xinning. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Hifuture Electric is 1.08 times less risky than Jiangsu Xinning. The stock trades about -0.1 of its potential returns per unit of risk. The Jiangsu Xinning Modern is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Jiangsu Xinning Modern on December 1, 2024 and sell it today you would lose (59.00) from holding Jiangsu Xinning Modern or give up 15.25% of portfolio value over 90 days.

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

Shenzhen Hifuture Electric  vs.  Jiangsu Xinning Modern

Shenzhen Hifuture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Hifuture Electric 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jiangsu Xinning Modern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Xinning Modern 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Hifuture and Jiangsu Xinning

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

The idea behind Shenzhen Hifuture Electric and Jiangsu Xinning Modern 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.