Correlation Between Shenzhen Glory and Dazhong Transportation

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

Diversification Opportunities for Shenzhen Glory and Dazhong Transportation

0.93

Correlation Coefficient

Shenzhen Glory  Dazhong Transportation

Almost no diversification

The 3 months correlation between Shenzhen and Dazhong is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation 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 Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Dazhong Transportation

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to generate 1.19 times more return on investment than Dazhong Transportation. However, Shenzhen Glory is 1.19 times more volatile than Dazhong Transportation Group. It trades about 0.05 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about 0.01 per unit of risk. If you would invest  311.00  in Shenzhen Glory Medical on December 26, 2024 and sell it today you would earn a total of  15.00  from holding Shenzhen Glory Medical or generate 4.82% return on investment over 90 days.

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

Shenzhen Glory Medical  vs.  Dazhong Transportation Group

Shenzhen Glory Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dazhong Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dazhong Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dazhong Transportation 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 Dazhong Transportation

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

The idea behind Shenzhen Glory Medical and Dazhong Transportation Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.