Correlation Between Shenzhen Zhongzhuang and Jinsanjiang Silicon

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

Diversification Opportunities for Shenzhen Zhongzhuang and Jinsanjiang Silicon

0.2

Correlation Coefficient

Shenzhen Zhongzhuang  Jinsanjiang Silicon

Modest diversification

The 3 months correlation between Shenzhen and Jinsanjiang is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang Silicon 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 Jinsanjiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang Silicon has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Jinsanjiang Silicon go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Jinsanjiang Silicon

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 0.92 times more return on investment than Jinsanjiang Silicon. However, Shenzhen Zhongzhuang Construction is 1.09 times less risky than Jinsanjiang Silicon. It trades about 0.3 of its potential returns per unit of risk. Jinsanjiang Silicon Material is currently generating about -0.06 per unit of risk. If you would invest  213.00  in Shenzhen Zhongzhuang Construction on October 26, 2024 and sell it today you would earn a total of  183.00  from holding Shenzhen Zhongzhuang Construction or generate 85.92% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Jinsanjiang Silicon Material

Shenzhen Zhongzhuang

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 23 (%) 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.

Jinsanjiang Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinsanjiang Silicon Material 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 Jinsanjiang Silicon

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

The idea behind Shenzhen Zhongzhuang Construction and Jinsanjiang Silicon Material 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.