Correlation Between Shenzhen Zhongzhuang and China Fortune

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

Diversification Opportunities for Shenzhen Zhongzhuang and China Fortune

0.76

Correlation Coefficient

Shenzhen Zhongzhuang  China Fortune

Poor diversification

The 3 months correlation between Shenzhen and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and China Fortune Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fortune Land 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 China Fortune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fortune Land has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and China Fortune go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and China Fortune

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 0.94 times more return on investment than China Fortune. However, Shenzhen Zhongzhuang Construction is 1.07 times less risky than China Fortune. It trades about -0.05 of its potential returns per unit of risk. China Fortune Land is currently generating about -0.13 per unit of risk. If you would invest  405.00  in Shenzhen Zhongzhuang Construction on December 25, 2024 and sell it today you would lose (42.00) from holding Shenzhen Zhongzhuang Construction or give up 10.37% of portfolio value over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  China Fortune Land

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

China Fortune Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Fortune Land 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Zhongzhuang and China Fortune

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

The idea behind Shenzhen Zhongzhuang Construction and China Fortune Land 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.