Correlation Between Shenzhen Glory and Zhejiang Tailin

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

Diversification Opportunities for Shenzhen Glory and Zhejiang Tailin

0.25

Correlation Coefficient

Shenzhen Glory  Zhejiang Tailin

Modest diversification

The 3 months correlation between Shenzhen and Zhejiang is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Zhejiang Tailin Bioengineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Tailin Bioe 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 Zhejiang Tailin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Tailin Bioe has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Zhejiang Tailin go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Zhejiang Tailin

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to under-perform the Zhejiang Tailin. In addition to that, Shenzhen Glory is 1.56 times more volatile than Zhejiang Tailin Bioengineering. It trades about -0.39 of its total potential returns per unit of risk. Zhejiang Tailin Bioengineering is currently generating about -0.51 per unit of volatility. If you would invest  2,043  in Zhejiang Tailin Bioengineering on October 7, 2024 and sell it today you would lose (397.00) from holding Zhejiang Tailin Bioengineering or give up 19.43% of portfolio value over 90 days.

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

Shenzhen Glory Medical  vs.  Zhejiang Tailin Bioengineering

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.

Zhejiang Tailin Bioe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Tailin Bioengineering 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.

Pair Trading with Shenzhen Glory and Zhejiang Tailin

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

The idea behind Shenzhen Glory Medical and Zhejiang Tailin Bioengineering 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.