Correlation Between Chongqing Shunbo and Shenzhen Glory

Can any of the company-specific risk be diversified away by investing in both Chongqing Shunbo and Shenzhen Glory 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 Chongqing Shunbo and Shenzhen Glory into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Shunbo Aluminum and Shenzhen Glory Medical, you can compare the effects of market volatilities on Chongqing Shunbo and Shenzhen Glory 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 Chongqing Shunbo with a short position of Shenzhen Glory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Shunbo and Shenzhen Glory.

Diversification Opportunities for Chongqing Shunbo and Shenzhen Glory

0.92

Correlation Coefficient

Chongqing Shunbo  Shenzhen Glory

Almost no diversification

The 3 months correlation between Chongqing and Shenzhen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum and Shenzhen Glory Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Glory Medical and Chongqing Shunbo 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 Chongqing Shunbo Aluminum are associated (or correlated) with Shenzhen Glory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Glory Medical has no effect on the direction of Chongqing Shunbo i.e., Chongqing Shunbo and Shenzhen Glory go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Shenzhen Glory

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to under-perform the Shenzhen Glory. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Shunbo Aluminum is 1.06 times less risky than Shenzhen Glory. The stock trades about -0.02 of its potential returns per unit of risk. The Shenzhen Glory Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  469.00  in Shenzhen Glory Medical on September 27, 2024 and sell it today you would lose (159.00) from holding Shenzhen Glory Medical or give up 33.9% of portfolio value over 90 days.

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

Chongqing Shunbo Aluminum  vs.  Shenzhen Glory Medical

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Shunbo sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Glory Medical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Shunbo and Shenzhen Glory

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

The idea behind Chongqing Shunbo Aluminum and Shenzhen Glory Medical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.