Correlation Between Songz Automobile and Shenzhen Kaifa

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

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

Diversification Opportunities for Songz Automobile and Shenzhen Kaifa

0.78

Correlation Coefficient

Songz Automobile  Shenzhen Kaifa

Poor diversification

The 3 months correlation between Songz and Shenzhen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Songz Automobile Air 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 Songz Automobile 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 Songz Automobile Air 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 Songz Automobile i.e., Songz Automobile and Shenzhen Kaifa go up and down completely randomly.

Pair Corralation between Songz Automobile and Shenzhen Kaifa

Assuming the 90 days trading horizon Songz Automobile Air is expected to under-perform the Shenzhen Kaifa. But the stock apears to be less risky and, when comparing its historical volatility, Songz Automobile Air is 1.24 times less risky than Shenzhen Kaifa. The stock trades about -0.29 of its potential returns per unit of risk. The Shenzhen Kaifa Technology is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,003  in Shenzhen Kaifa Technology on October 11, 2024 and sell it today you would lose (216.00) from holding Shenzhen Kaifa Technology or give up 10.78% of portfolio value over 90 days.

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

Songz Automobile Air  vs.  Shenzhen Kaifa Technology

Songz Automobile Air

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Songz Automobile Air are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Songz Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Kaifa Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kaifa Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kaifa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Songz Automobile and Shenzhen Kaifa

The main advantage of trading using opposite Songz Automobile and Shenzhen Kaifa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Songz Automobile 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 Songz Automobile Air 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.