Correlation Between Guangdong Shenglu and Shenzhen Kaifa

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

By analyzing existing cross correlation between Guangdong Shenglu Telecommunication and Shenzhen Kaifa Technology, you can compare the effects of market volatilities on Guangdong Shenglu and Shenzhen Kaifa 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 Guangdong Shenglu with a short position of Shenzhen Kaifa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and Shenzhen Kaifa.

Diversification Opportunities for Guangdong Shenglu and Shenzhen Kaifa

0.64

Correlation Coefficient

Guangdong Shenglu  Shenzhen Kaifa

Poor diversification

The 3 months correlation between Guangdong and Shenzhen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and Shenzhen Kaifa Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kaifa Technology and Guangdong Shenglu 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 Guangdong Shenglu Telecommunication are associated (or correlated) with Shenzhen Kaifa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kaifa Technology has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and Shenzhen Kaifa go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and Shenzhen Kaifa

Assuming the 90 days trading horizon Guangdong Shenglu is expected to generate 7.29 times less return on investment than Shenzhen Kaifa. In addition to that, Guangdong Shenglu is 1.01 times more volatile than Shenzhen Kaifa Technology. It trades about 0.01 of its total potential returns per unit of risk. Shenzhen Kaifa Technology is currently generating about 0.07 per unit of volatility. If you would invest  1,271  in Shenzhen Kaifa Technology on October 25, 2024 and sell it today you would earn a total of  715.00  from holding Shenzhen Kaifa Technology or generate 56.25% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  Shenzhen Kaifa Technology

Guangdong Shenglu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Shenglu Telecommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenzhen Kaifa Technology

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Guangdong Shenglu and Shenzhen Kaifa

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

The idea behind Guangdong Shenglu Telecommunication and Shenzhen Kaifa Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.