Correlation Between Dalian Zeus and Shuhua Sports

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Can any of the company-specific risk be diversified away by investing in both Dalian Zeus and Shuhua Sports 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 Dalian Zeus and Shuhua Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dalian Zeus Entertainment and Shuhua Sports Co, you can compare the effects of market volatilities on Dalian Zeus and Shuhua Sports 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 Dalian Zeus with a short position of Shuhua Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Zeus and Shuhua Sports.

Diversification Opportunities for Dalian Zeus and Shuhua Sports

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Dalian and Shuhua is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Zeus Entertainment and Shuhua Sports Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuhua Sports and Dalian Zeus 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 Dalian Zeus Entertainment are associated (or correlated) with Shuhua Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuhua Sports has no effect on the direction of Dalian Zeus i.e., Dalian Zeus and Shuhua Sports go up and down completely randomly.

Pair Corralation between Dalian Zeus and Shuhua Sports

Assuming the 90 days trading horizon Dalian Zeus Entertainment is expected to generate 1.88 times more return on investment than Shuhua Sports. However, Dalian Zeus is 1.88 times more volatile than Shuhua Sports Co. It trades about 0.27 of its potential returns per unit of risk. Shuhua Sports Co is currently generating about 0.16 per unit of risk. If you would invest  270.00  in Dalian Zeus Entertainment on September 5, 2024 and sell it today you would earn a total of  263.00  from holding Dalian Zeus Entertainment or generate 97.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Dalian Zeus Entertainment  vs.  Shuhua Sports Co

 Performance 
       Timeline  
Dalian Zeus Entertainment 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Zeus Entertainment are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Zeus sustained solid returns over the last few months and may actually be approaching a breakup point.
Shuhua Sports 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Dalian Zeus and Shuhua Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dalian Zeus and Shuhua Sports

The main advantage of trading using opposite Dalian Zeus and Shuhua Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dalian Zeus position performs unexpectedly, Shuhua Sports 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 Shuhua Sports will offset losses from the drop in Shuhua Sports' long position.
The idea behind Dalian Zeus Entertainment and Shuhua Sports 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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