Correlation Between Shenzhen Topway and Fujian Longzhou

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

By analyzing existing cross correlation between Shenzhen Topway Video and Fujian Longzhou Transportation, you can compare the effects of market volatilities on Shenzhen Topway and Fujian Longzhou 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 Topway with a short position of Fujian Longzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Topway and Fujian Longzhou.

Diversification Opportunities for Shenzhen Topway and Fujian Longzhou

0.9

Correlation Coefficient

Shenzhen Topway  Fujian Longzhou

Almost no diversification

The 3 months correlation between Shenzhen and Fujian is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Topway Video and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and Shenzhen Topway 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 Topway Video are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of Shenzhen Topway i.e., Shenzhen Topway and Fujian Longzhou go up and down completely randomly.

Pair Corralation between Shenzhen Topway and Fujian Longzhou

Assuming the 90 days trading horizon Shenzhen Topway is expected to generate 1.45 times less return on investment than Fujian Longzhou. But when comparing it to its historical volatility, Shenzhen Topway Video is 1.44 times less risky than Fujian Longzhou. It trades about 0.11 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  455.00  in Fujian Longzhou Transportation on September 23, 2024 and sell it today you would earn a total of  41.00  from holding Fujian Longzhou Transportation or generate 9.01% return on investment over 90 days.

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

Shenzhen Topway Video  vs.  Fujian Longzhou Transportation

Shenzhen Topway Video

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway sustained solid returns over the last few months and may actually be approaching a breakup point.

Fujian Longzhou Tran

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Topway and Fujian Longzhou

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

The idea behind Shenzhen Topway Video and Fujian Longzhou Transportation 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.