Correlation Between Shenzhen MYS and Shengyuan Environmental

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

Diversification Opportunities for Shenzhen MYS and Shengyuan Environmental

0.38

Correlation Coefficient

Shenzhen MYS  Shengyuan Environmental

Weak diversification

The 3 months correlation between Shenzhen and Shengyuan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and Shengyuan Environmental Protec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengyuan Environmental 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 Shengyuan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengyuan Environmental has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and Shengyuan Environmental go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Shengyuan Environmental

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to under-perform the Shengyuan Environmental. In addition to that, Shenzhen MYS is 2.16 times more volatile than Shengyuan Environmental Protection. It trades about -0.31 of its total potential returns per unit of risk. Shengyuan Environmental Protection is currently generating about -0.5 per unit of volatility. If you would invest  1,433  in Shengyuan Environmental Protection on October 9, 2024 and sell it today you would lose (194.00) from holding Shengyuan Environmental Protection or give up 13.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Shenzhen MYS Environmental  vs.  Shengyuan Environmental Protec

Shenzhen MYS Environ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shengyuan Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengyuan Environmental Protection 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 Shengyuan Environmental

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

The idea behind Shenzhen MYS Environmental and Shengyuan Environmental Protection 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.