Correlation Between Shenzhen Zhongzhuang and Guangdong Advertising

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

Diversification Opportunities for Shenzhen Zhongzhuang and Guangdong Advertising

0.46

Correlation Coefficient

Shenzhen Zhongzhuang  Guangdong Advertising

Very weak diversification

The 3 months correlation between Shenzhen and Guangdong is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Guangdong Advertising Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Advertising 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 Guangdong Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Advertising has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Guangdong Advertising go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Guangdong Advertising

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 0.64 times more return on investment than Guangdong Advertising. However, Shenzhen Zhongzhuang Construction is 1.56 times less risky than Guangdong Advertising. It trades about 0.03 of its potential returns per unit of risk. Guangdong Advertising Co is currently generating about -0.02 per unit of risk. If you would invest  378.00  in Shenzhen Zhongzhuang Construction on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Shenzhen Zhongzhuang Construction or generate 0.79% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Guangdong Advertising Co

Shenzhen Zhongzhuang

Risk-Adjusted Performance

Very Weak

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

Guangdong Advertising

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Advertising Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Advertising 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 Zhongzhuang and Guangdong Advertising

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

The idea behind Shenzhen Zhongzhuang Construction and Guangdong Advertising 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.