Correlation Between Shenzhen New and CIMC Vehicles

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

Diversification Opportunities for Shenzhen New and CIMC Vehicles

0.29

Correlation Coefficient

Shenzhen New  CIMC Vehicles

Modest diversification

The 3 months correlation between Shenzhen and CIMC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen New Nanshan and CIMC Vehicles Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMC Vehicles 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 CIMC Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMC Vehicles has no effect on the direction of Shenzhen New i.e., Shenzhen New and CIMC Vehicles go up and down completely randomly.

Pair Corralation between Shenzhen New and CIMC Vehicles

Assuming the 90 days trading horizon Shenzhen New Nanshan is expected to generate 1.31 times more return on investment than CIMC Vehicles. However, Shenzhen New is 1.31 times more volatile than CIMC Vehicles Co. It trades about -0.04 of its potential returns per unit of risk. CIMC Vehicles Co is currently generating about -0.16 per unit of risk. If you would invest  266.00  in Shenzhen New Nanshan on October 7, 2024 and sell it today you would lose (30.00) from holding Shenzhen New Nanshan or give up 11.28% of portfolio value over 90 days.

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

Shenzhen New Nanshan  vs.  CIMC Vehicles Co

Shenzhen New Nanshan

Risk-Adjusted Performance

0 of 100

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 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.

CIMC Vehicles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMC Vehicles Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen New and CIMC Vehicles

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

The idea behind Shenzhen New Nanshan and CIMC Vehicles 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.