Correlation Between Shenzhen MYS and Newcapec Electronics

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

Diversification Opportunities for Shenzhen MYS and Newcapec Electronics

0.19

Correlation Coefficient

Shenzhen MYS  Newcapec Electronics

Average diversification

The 3 months correlation between Shenzhen and Newcapec is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and Newcapec Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcapec Electronics 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 Newcapec Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcapec Electronics has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and Newcapec Electronics go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Newcapec Electronics

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to under-perform the Newcapec Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen MYS Environmental is 2.95 times less risky than Newcapec Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Newcapec Electronics Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,012  in Newcapec Electronics Co on December 28, 2024 and sell it today you would earn a total of  524.00  from holding Newcapec Electronics Co or generate 51.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Shenzhen MYS Environmental  vs.  Newcapec Electronics Co

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 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.

Newcapec Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newcapec Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newcapec Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen MYS and Newcapec Electronics

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

The idea behind Shenzhen MYS Environmental and Newcapec Electronics 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.