Correlation Between Shenzhen New and Guangzhou KingTeller

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

By analyzing existing cross correlation between Shenzhen New Nanshan and Guangzhou KingTeller Technology, you can compare the effects of market volatilities on Shenzhen New and Guangzhou KingTeller 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 New with a short position of Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen New and Guangzhou KingTeller.

Diversification Opportunities for Shenzhen New and Guangzhou KingTeller

0.75

Correlation Coefficient

Shenzhen New  Guangzhou KingTeller

Poor diversification

The 3 months correlation between Shenzhen and Guangzhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen New Nanshan and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and Shenzhen New 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 New Nanshan are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of Shenzhen New i.e., Shenzhen New and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between Shenzhen New and Guangzhou KingTeller

Assuming the 90 days trading horizon Shenzhen New Nanshan is expected to under-perform the Guangzhou KingTeller. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen New Nanshan is 1.68 times less risky than Guangzhou KingTeller. The stock trades about -0.1 of its potential returns per unit of risk. The Guangzhou KingTeller Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  513.00  in Guangzhou KingTeller Technology on December 1, 2024 and sell it today you would lose (43.00) from holding Guangzhou KingTeller Technology or give up 8.38% of portfolio value over 90 days.

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

Shenzhen New Nanshan  vs.  Guangzhou KingTeller Technolog

Shenzhen New Nanshan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen New Nanshan 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.

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shenzhen New and Guangzhou KingTeller

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

The idea behind Shenzhen New Nanshan and Guangzhou KingTeller Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.