Correlation Between Shenzhen MTC and 516220

Can any of the company-specific risk be diversified away by investing in both Shenzhen MTC and 516220 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 516220 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 516220, you can compare the effects of market volatilities on Shenzhen MTC and 516220 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 516220. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen MTC and 516220.

Diversification Opportunities for Shenzhen MTC and 516220

0.91

Correlation Coefficient

Shenzhen MTC  516220

Almost no diversification

The 3 months correlation between Shenzhen and 516220 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MTC Co and 516220 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 516220 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 516220. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 516220 has no effect on the direction of Shenzhen MTC i.e., Shenzhen MTC and 516220 go up and down completely randomly.

Pair Corralation between Shenzhen MTC and 516220

Assuming the 90 days trading horizon Shenzhen MTC Co is expected to generate 1.42 times more return on investment than 516220. However, Shenzhen MTC is 1.42 times more volatile than 516220. It trades about 0.05 of its potential returns per unit of risk. 516220 is currently generating about -0.16 per unit of risk. If you would invest  518.00  in Shenzhen MTC Co on September 21, 2024 and sell it today you would earn a total of  8.00  from holding Shenzhen MTC Co or generate 1.54% return on investment over 90 days.

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

Shenzhen MTC Co  vs.  516220

Shenzhen MTC

Risk-Adjusted Performance

8 of 100

OK

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

516220

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 516220 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 516220 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen MTC and 516220

The main advantage of trading using opposite Shenzhen MTC and 516220 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen MTC position performs unexpectedly, 516220 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 516220 will offset losses from the drop in 516220's long position.

The idea behind Shenzhen MTC Co and 516220 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.