Correlation Between Shenzhen Hifuture and UE Furniture

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

Diversification Opportunities for Shenzhen Hifuture and UE Furniture

-0.03

Correlation Coefficient

Shenzhen Hifuture  UE Furniture

Good diversification

The 3 months correlation between Shenzhen and 603600 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Hifuture Electric and UE Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UE Furniture 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 UE Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UE Furniture has no effect on the direction of Shenzhen Hifuture i.e., Shenzhen Hifuture and UE Furniture go up and down completely randomly.

Pair Corralation between Shenzhen Hifuture and UE Furniture

Assuming the 90 days trading horizon Shenzhen Hifuture Electric is expected to generate 1.57 times more return on investment than UE Furniture. However, Shenzhen Hifuture is 1.57 times more volatile than UE Furniture Co. It trades about 0.25 of its potential returns per unit of risk. UE Furniture Co is currently generating about 0.06 per unit of risk. If you would invest  273.00  in Shenzhen Hifuture Electric on September 13, 2024 and sell it today you would earn a total of  42.00  from holding Shenzhen Hifuture Electric or generate 15.38% return on investment over 90 days.

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

Shenzhen Hifuture Electric  vs.  UE Furniture Co

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.

UE Furniture

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UE Furniture Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UE Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Hifuture and UE Furniture

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

The idea behind Shenzhen Hifuture Electric and UE Furniture Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.