Correlation Between Shenzhen MYS and Rongan Property

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

By analyzing existing cross correlation between Shenzhen MYS Environmental and Rongan Property Co, you can compare the effects of market volatilities on Shenzhen MYS and Rongan Property 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 MYS with a short position of Rongan Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen MYS and Rongan Property.

Diversification Opportunities for Shenzhen MYS and Rongan Property

0.36

Correlation Coefficient

Shenzhen MYS  Rongan Property

Weak diversification

The 3 months correlation between Shenzhen and Rongan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and Rongan Property Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rongan Property and Shenzhen MYS 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 MYS Environmental are associated (or correlated) with Rongan Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rongan Property has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and Rongan Property go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Rongan Property

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to generate 1.62 times more return on investment than Rongan Property. However, Shenzhen MYS is 1.62 times more volatile than Rongan Property Co. It trades about -0.01 of its potential returns per unit of risk. Rongan Property Co is currently generating about -0.25 per unit of risk. If you would invest  336.00  in Shenzhen MYS Environmental on October 8, 2024 and sell it today you would lose (14.00) from holding Shenzhen MYS Environmental or give up 4.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Shenzhen MYS Environmental  vs.  Rongan Property Co

Shenzhen MYS Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen MYS Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen MYS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rongan Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rongan Property Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen MYS and Rongan Property

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

The idea behind Shenzhen MYS Environmental and Rongan Property 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.