Correlation Between Shenzhen Shenbao and Shandong Ruifeng

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

By analyzing existing cross correlation between Shenzhen Shenbao Industrial and Shandong Ruifeng Chemical, you can compare the effects of market volatilities on Shenzhen Shenbao and Shandong Ruifeng 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 Shenbao with a short position of Shandong Ruifeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Shenbao and Shandong Ruifeng.

Diversification Opportunities for Shenzhen Shenbao and Shandong Ruifeng

0.26

Correlation Coefficient

Shenzhen Shenbao  Shandong Ruifeng

Modest diversification

The 3 months correlation between Shenzhen and Shandong is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Shenbao Industrial and Shandong Ruifeng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Ruifeng Chemical and Shenzhen Shenbao 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 Shenbao Industrial are associated (or correlated) with Shandong Ruifeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Ruifeng Chemical has no effect on the direction of Shenzhen Shenbao i.e., Shenzhen Shenbao and Shandong Ruifeng go up and down completely randomly.

Pair Corralation between Shenzhen Shenbao and Shandong Ruifeng

Assuming the 90 days trading horizon Shenzhen Shenbao Industrial is expected to under-perform the Shandong Ruifeng. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Shenbao Industrial is 3.74 times less risky than Shandong Ruifeng. The stock trades about -0.09 of its potential returns per unit of risk. The Shandong Ruifeng Chemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  999.00  in Shandong Ruifeng Chemical on December 27, 2024 and sell it today you would earn a total of  26.00  from holding Shandong Ruifeng Chemical or generate 2.6% return on investment over 90 days.

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

Shenzhen Shenbao Industrial  vs.  Shandong Ruifeng Chemical

Shenzhen Shenbao Ind

Risk-Adjusted Performance

Very Weak

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

Shandong Ruifeng Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Ruifeng Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shandong Ruifeng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Shenbao and Shandong Ruifeng

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

The idea behind Shenzhen Shenbao Industrial and Shandong Ruifeng Chemical 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.