Correlation Between Shenzhen Zhongzhuang and Inner Mongolia

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

Diversification Opportunities for Shenzhen Zhongzhuang and Inner Mongolia

-0.82

Correlation Coefficient

Shenzhen Zhongzhuang  Inner Mongolia

Pay attention - limited upside

The 3 months correlation between Shenzhen and Inner is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Inner Mongolia Furui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Furui 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Furui has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Inner Mongolia go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Inner Mongolia

Assuming the 90 days trading horizon Shenzhen Zhongzhuang is expected to generate 6.04 times less return on investment than Inner Mongolia. But when comparing it to its historical volatility, Shenzhen Zhongzhuang Construction is 1.25 times less risky than Inner Mongolia. It trades about 0.0 of its potential returns per unit of risk. Inner Mongolia Furui is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,858  in Inner Mongolia Furui on October 5, 2024 and sell it today you would earn a total of  199.00  from holding Inner Mongolia Furui or generate 6.96% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Inner Mongolia Furui

Shenzhen Zhongzhuang

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 27 (%) 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.

Inner Mongolia Furui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inner Mongolia Furui has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Zhongzhuang and Inner Mongolia

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

The idea behind Shenzhen Zhongzhuang Construction and Inner Mongolia Furui 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.