Correlation Between Zhejiang Kingland and Shenzhen Shenbao

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

By analyzing existing cross correlation between Zhejiang Kingland Pipeline and Shenzhen Shenbao Industrial, you can compare the effects of market volatilities on Zhejiang Kingland and Shenzhen Shenbao 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 Zhejiang Kingland with a short position of Shenzhen Shenbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Kingland and Shenzhen Shenbao.

Diversification Opportunities for Zhejiang Kingland and Shenzhen Shenbao

0.85

Correlation Coefficient

Zhejiang Kingland  Shenzhen Shenbao

Very poor diversification

The 3 months correlation between Zhejiang and Shenzhen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Kingland Pipeline and Shenzhen Shenbao Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Shenbao Ind and Zhejiang Kingland 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 Zhejiang Kingland Pipeline are associated (or correlated) with Shenzhen Shenbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Shenbao Ind has no effect on the direction of Zhejiang Kingland i.e., Zhejiang Kingland and Shenzhen Shenbao go up and down completely randomly.

Pair Corralation between Zhejiang Kingland and Shenzhen Shenbao

Assuming the 90 days trading horizon Zhejiang Kingland Pipeline is expected to generate 1.05 times more return on investment than Shenzhen Shenbao. However, Zhejiang Kingland is 1.05 times more volatile than Shenzhen Shenbao Industrial. It trades about 0.15 of its potential returns per unit of risk. Shenzhen Shenbao Industrial is currently generating about 0.13 per unit of risk. If you would invest  518.00  in Zhejiang Kingland Pipeline on September 3, 2024 and sell it today you would earn a total of  121.00  from holding Zhejiang Kingland Pipeline or generate 23.36% return on investment over 90 days.

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

Zhejiang Kingland Pipeline  vs.  Shenzhen Shenbao Industrial

Zhejiang Kingland

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Kingland Pipeline are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Kingland sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Shenbao Ind

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Zhejiang Kingland and Shenzhen Shenbao

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

The idea behind Zhejiang Kingland Pipeline and Shenzhen Shenbao Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.