Correlation Between Shenzhen Hifuture and Hang Xiao

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

Diversification Opportunities for Shenzhen Hifuture and Hang Xiao

0.27

Correlation Coefficient

Shenzhen Hifuture  Hang Xiao

Modest diversification

The 3 months correlation between Shenzhen and Hang is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Hifuture Electric and Hang Xiao Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Xiao Steel 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 Hang Xiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Xiao Steel has no effect on the direction of Shenzhen Hifuture i.e., Shenzhen Hifuture and Hang Xiao go up and down completely randomly.

Pair Corralation between Shenzhen Hifuture and Hang Xiao

Assuming the 90 days trading horizon Shenzhen Hifuture is expected to generate 1.71 times less return on investment than Hang Xiao. In addition to that, Shenzhen Hifuture is 1.02 times more volatile than Hang Xiao Steel. It trades about 0.12 of its total potential returns per unit of risk. Hang Xiao Steel is currently generating about 0.21 per unit of volatility. If you would invest  216.00  in Hang Xiao Steel on September 13, 2024 and sell it today you would earn a total of  86.00  from holding Hang Xiao Steel or generate 39.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Shenzhen Hifuture Electric  vs.  Hang Xiao Steel

Shenzhen Hifuture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Hifuture Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Hifuture sustained solid returns over the last few months and may actually be approaching a breakup point.

Hang Xiao Steel

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Xiao Steel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hang Xiao sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Hifuture and Hang Xiao

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

The idea behind Shenzhen Hifuture Electric and Hang Xiao Steel 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.