Correlation Between Shenzhen Zhongzhuang and Central Plains

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

By analyzing existing cross correlation between Shenzhen Zhongzhuang Construction and Central Plains Environment, you can compare the effects of market volatilities on Shenzhen Zhongzhuang and Central Plains 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 Zhongzhuang with a short position of Central Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Zhongzhuang and Central Plains.

Diversification Opportunities for Shenzhen Zhongzhuang and Central Plains

0.67

Correlation Coefficient

Shenzhen Zhongzhuang  Central Plains

Poor diversification

The 3 months correlation between Shenzhen and Central is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Central Plains Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Plains Envir and Shenzhen Zhongzhuang 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 Zhongzhuang Construction are associated (or correlated) with Central Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Plains Envir has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Central Plains go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Central Plains

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 1.33 times more return on investment than Central Plains. However, Shenzhen Zhongzhuang is 1.33 times more volatile than Central Plains Environment. It trades about 0.43 of its potential returns per unit of risk. Central Plains Environment is currently generating about 0.19 per unit of risk. If you would invest  203.00  in Shenzhen Zhongzhuang Construction on September 13, 2024 and sell it today you would earn a total of  240.00  from holding Shenzhen Zhongzhuang Construction or generate 118.23% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Central Plains Environment

Shenzhen Zhongzhuang

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Central Plains Envir

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Plains Environment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Plains sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Zhongzhuang and Central Plains

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

The idea behind Shenzhen Zhongzhuang Construction and Central Plains Environment 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 CEOs Directory module to screen CEOs from public companies around the world.