Correlation Between Shenzhen Zhongzhuang and Zhangjiagang Freetrade

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

Diversification Opportunities for Shenzhen Zhongzhuang and Zhangjiagang Freetrade

0.81

Correlation Coefficient

Shenzhen Zhongzhuang  Zhangjiagang Freetrade

Very poor diversification

The 3 months correlation between Shenzhen and Zhangjiagang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 1.36 times more return on investment than Zhangjiagang Freetrade. However, Shenzhen Zhongzhuang is 1.36 times more volatile than Zhangjiagang Freetrade Science. It trades about 0.31 of its potential returns per unit of risk. Zhangjiagang Freetrade Science is currently generating about 0.06 per unit of risk. If you would invest  182.00  in Shenzhen Zhongzhuang Construction on October 22, 2024 and sell it today you would earn a total of  168.00  from holding Shenzhen Zhongzhuang Construction or generate 92.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Shenzhen Zhongzhuang Construct  vs.  Zhangjiagang Freetrade Science

Shenzhen Zhongzhuang

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 24 (%) 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.

Zhangjiagang Freetrade

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Freetrade Science are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhangjiagang Freetrade may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Zhongzhuang and Zhangjiagang Freetrade

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

The idea behind Shenzhen Zhongzhuang Construction and Zhangjiagang Freetrade Science 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.