Correlation Between Shenzhen Glory and Yingde Greatchem

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

By analyzing existing cross correlation between Shenzhen Glory Medical and Yingde Greatchem Chemicals, you can compare the effects of market volatilities on Shenzhen Glory and Yingde Greatchem 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 Glory with a short position of Yingde Greatchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Glory and Yingde Greatchem.

Diversification Opportunities for Shenzhen Glory and Yingde Greatchem

0.81

Correlation Coefficient

Shenzhen Glory  Yingde Greatchem

Very poor diversification

The 3 months correlation between Shenzhen and Yingde is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che and Shenzhen Glory 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 Glory Medical are associated (or correlated) with Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Yingde Greatchem

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to generate 1.38 times more return on investment than Yingde Greatchem. However, Shenzhen Glory is 1.38 times more volatile than Yingde Greatchem Chemicals. It trades about -0.05 of its potential returns per unit of risk. Yingde Greatchem Chemicals is currently generating about -0.06 per unit of risk. If you would invest  329.00  in Shenzhen Glory Medical on October 26, 2024 and sell it today you would lose (36.00) from holding Shenzhen Glory Medical or give up 10.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Shenzhen Glory Medical  vs.  Yingde Greatchem Chemicals

Shenzhen Glory Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen Glory and Yingde Greatchem

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

The idea behind Shenzhen Glory Medical and Yingde Greatchem Chemicals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.