Correlation Between SUNSEA Telecommunicatio and Shenzhen Coship

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

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

Diversification Opportunities for SUNSEA Telecommunicatio and Shenzhen Coship

0.5

Correlation Coefficient

SUNSEA Telecommunicatio  Shenzhen Coship

Very weak diversification

The 3 months correlation between SUNSEA and Shenzhen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SUNSEA Telecommunications Co and Shenzhen Coship Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Coship Elec and SUNSEA Telecommunicatio 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 SUNSEA Telecommunications Co are associated (or correlated) with Shenzhen Coship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Coship Elec has no effect on the direction of SUNSEA Telecommunicatio i.e., SUNSEA Telecommunicatio and Shenzhen Coship go up and down completely randomly.

Pair Corralation between SUNSEA Telecommunicatio and Shenzhen Coship

Assuming the 90 days trading horizon SUNSEA Telecommunicatio is expected to generate 1.89 times less return on investment than Shenzhen Coship. In addition to that, SUNSEA Telecommunicatio is 1.24 times more volatile than Shenzhen Coship Electronics. It trades about 0.04 of its total potential returns per unit of risk. Shenzhen Coship Electronics is currently generating about 0.09 per unit of volatility. If you would invest  204.00  in Shenzhen Coship Electronics on October 11, 2024 and sell it today you would earn a total of  441.00  from holding Shenzhen Coship Electronics or generate 216.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

SUNSEA Telecommunications Co  vs.  Shenzhen Coship Electronics

SUNSEA Telecommunicatio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUNSEA Telecommunications Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SUNSEA Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Coship Elec

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Coship sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SUNSEA Telecommunicatio and Shenzhen Coship

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

The idea behind SUNSEA Telecommunications Co and Shenzhen Coship Electronics 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.