Correlation Between Shenzhen MYS and City Development

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

Diversification Opportunities for Shenzhen MYS and City Development

0.94

Correlation Coefficient

Shenzhen MYS  City Development

Almost no diversification

The 3 months correlation between Shenzhen and City is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and City Development Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Development Env 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 City Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Development Env has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and City Development go up and down completely randomly.

Pair Corralation between Shenzhen MYS and City Development

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to generate 1.19 times more return on investment than City Development. However, Shenzhen MYS is 1.19 times more volatile than City Development Environment. It trades about 0.07 of its potential returns per unit of risk. City Development Environment is currently generating about 0.07 per unit of risk. If you would invest  315.00  in Shenzhen MYS Environmental on December 11, 2024 and sell it today you would earn a total of  12.00  from holding Shenzhen MYS Environmental or generate 3.81% return on investment over 90 days.

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

Shenzhen MYS Environmental  vs.  City Development Environment

Shenzhen MYS Environ

Risk-Adjusted Performance

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 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.

City Development Env

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Development Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shenzhen MYS and City Development

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

The idea behind Shenzhen MYS Environmental and City Development Environment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.