Correlation Between Shenzhen Silver and Jinhe Biotechnology

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

By analyzing existing cross correlation between Shenzhen Silver Basis and Jinhe Biotechnology Co, you can compare the effects of market volatilities on Shenzhen Silver and Jinhe Biotechnology 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 Silver with a short position of Jinhe Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Silver and Jinhe Biotechnology.

Diversification Opportunities for Shenzhen Silver and Jinhe Biotechnology

0.54

Correlation Coefficient

Shenzhen Silver  Jinhe Biotechnology

Very weak diversification

The 3 months correlation between Shenzhen and Jinhe is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Silver Basis and Jinhe Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhe Biotechnology and Shenzhen Silver 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 Silver Basis are associated (or correlated) with Jinhe Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhe Biotechnology has no effect on the direction of Shenzhen Silver i.e., Shenzhen Silver and Jinhe Biotechnology go up and down completely randomly.

Pair Corralation between Shenzhen Silver and Jinhe Biotechnology

Assuming the 90 days trading horizon Shenzhen Silver is expected to generate 1.96 times less return on investment than Jinhe Biotechnology. In addition to that, Shenzhen Silver is 1.84 times more volatile than Jinhe Biotechnology Co. It trades about 0.03 of its total potential returns per unit of risk. Jinhe Biotechnology Co is currently generating about 0.09 per unit of volatility. If you would invest  391.00  in Jinhe Biotechnology Co on September 27, 2024 and sell it today you would earn a total of  50.00  from holding Jinhe Biotechnology Co or generate 12.79% return on investment over 90 days.

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

Shenzhen Silver Basis  vs.  Jinhe Biotechnology Co

Shenzhen Silver Basis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Silver Basis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Silver may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jinhe Biotechnology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhe Biotechnology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhe Biotechnology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Silver and Jinhe Biotechnology

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

The idea behind Shenzhen Silver Basis and Jinhe Biotechnology Co 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.