Correlation Between Shenzhen Glory and Nanjing Vishee

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

Diversification Opportunities for Shenzhen Glory and Nanjing Vishee

0.8

Correlation Coefficient

Shenzhen Glory  Nanjing Vishee

Very poor diversification

The 3 months correlation between Shenzhen and Nanjing is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Nanjing Vishee Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Vishee Medical 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 Nanjing Vishee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Vishee Medical has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Nanjing Vishee go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Nanjing Vishee

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to generate 0.85 times more return on investment than Nanjing Vishee. However, Shenzhen Glory Medical is 1.18 times less risky than Nanjing Vishee. It trades about -0.02 of its potential returns per unit of risk. Nanjing Vishee Medical is currently generating about -0.06 per unit of risk. If you would invest  397.00  in Shenzhen Glory Medical on October 9, 2024 and sell it today you would lose (103.00) from holding Shenzhen Glory Medical or give up 25.94% of portfolio value over 90 days.

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

Shenzhen Glory Medical  vs.  Nanjing Vishee Medical

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 somewhat strong basic indicators, Shenzhen Glory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nanjing Vishee Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nanjing Vishee Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nanjing Vishee is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Glory and Nanjing Vishee

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

The idea behind Shenzhen Glory Medical and Nanjing Vishee Medical 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.