Correlation Between Blue Sail and Shenzhen SDG

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

By analyzing existing cross correlation between Blue Sail Medical and Shenzhen SDG Service, you can compare the effects of market volatilities on Blue Sail and Shenzhen SDG 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 Blue Sail with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Sail and Shenzhen SDG.

Diversification Opportunities for Blue Sail and Shenzhen SDG

0.79

Correlation Coefficient

Blue Sail  Shenzhen SDG

Poor diversification

The 3 months correlation between Blue and Shenzhen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Shenzhen SDG Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Service and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Service has no effect on the direction of Blue Sail i.e., Blue Sail and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Blue Sail and Shenzhen SDG

Assuming the 90 days trading horizon Blue Sail is expected to generate 2.59 times less return on investment than Shenzhen SDG. But when comparing it to its historical volatility, Blue Sail Medical is 2.81 times less risky than Shenzhen SDG. It trades about 0.09 of its potential returns per unit of risk. Shenzhen SDG Service is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,502  in Shenzhen SDG Service on September 25, 2024 and sell it today you would earn a total of  1,650  from holding Shenzhen SDG Service or generate 47.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.18%
Values	Daily Returns

Blue Sail Medical  vs.  Shenzhen SDG Service

Blue Sail Medical

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen SDG Service

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Blue Sail and Shenzhen SDG

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

The idea behind Blue Sail Medical and Shenzhen SDG Service 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.