Correlation Between Elite Color and Shenzhen Silver

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

By analyzing existing cross correlation between Elite Color Environmental and Shenzhen Silver Basis, you can compare the effects of market volatilities on Elite Color and Shenzhen Silver 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 Elite Color with a short position of Shenzhen Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Color and Shenzhen Silver.

Diversification Opportunities for Elite Color and Shenzhen Silver

0.36

Correlation Coefficient

Elite Color  Shenzhen Silver

Weak diversification

The 3 months correlation between Elite and Shenzhen is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Elite Color Environmental and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Elite Color 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 Elite Color Environmental are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Elite Color i.e., Elite Color and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Elite Color and Shenzhen Silver

Assuming the 90 days trading horizon Elite Color is expected to generate 16.02 times less return on investment than Shenzhen Silver. But when comparing it to its historical volatility, Elite Color Environmental is 1.93 times less risky than Shenzhen Silver. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  765.00  in Shenzhen Silver Basis on September 28, 2024 and sell it today you would earn a total of  208.00  from holding Shenzhen Silver Basis or generate 27.19% return on investment over 90 days.

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

Elite Color Environmental  vs.  Shenzhen Silver Basis

Elite Color Environmental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Color Environmental are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Elite Color is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Silver Basis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Silver Basis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Silver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elite Color and Shenzhen Silver

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

The idea behind Elite Color Environmental and Shenzhen Silver Basis 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.