Correlation Between Shenzhen MTC and Hwabao WP

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

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

Diversification Opportunities for Shenzhen MTC and Hwabao WP

0.01

Correlation Coefficient

Shenzhen MTC  Hwabao WP

Significant diversification

The 3 months correlation between Shenzhen and Hwabao is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MTC Co and Hwabao WP CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwabao WP CSI and Shenzhen MTC 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 MTC Co are associated (or correlated) with Hwabao WP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwabao WP CSI has no effect on the direction of Shenzhen MTC i.e., Shenzhen MTC and Hwabao WP go up and down completely randomly.

Pair Corralation between Shenzhen MTC and Hwabao WP

Assuming the 90 days trading horizon Shenzhen MTC Co is expected to generate 2.32 times more return on investment than Hwabao WP. However, Shenzhen MTC is 2.32 times more volatile than Hwabao WP CSI. It trades about 0.05 of its potential returns per unit of risk. Hwabao WP CSI is currently generating about -0.31 per unit of risk. If you would invest  517.00  in Shenzhen MTC Co on October 11, 2024 and sell it today you would earn a total of  13.00  from holding Shenzhen MTC Co or generate 2.51% return on investment over 90 days.

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

Shenzhen MTC Co  vs.  Hwabao WP CSI

Shenzhen MTC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MTC Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MTC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hwabao WP CSI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwabao WP CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Shenzhen MTC and Hwabao WP

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

The idea behind Shenzhen MTC Co and Hwabao WP CSI 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.