Correlation Between Nanjing Putian and Shenzhen Sunlord

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

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Shenzhen Sunlord Electronics, you can compare the effects of market volatilities on Nanjing Putian and Shenzhen Sunlord 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 Nanjing Putian with a short position of Shenzhen Sunlord. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Shenzhen Sunlord.

Diversification Opportunities for Nanjing Putian and Shenzhen Sunlord

0.54

Correlation Coefficient

Nanjing Putian  Shenzhen Sunlord

Very weak diversification

The 3 months correlation between Nanjing and Shenzhen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Shenzhen Sunlord Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunlord Ele and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Shenzhen Sunlord. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunlord Ele has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Shenzhen Sunlord go up and down completely randomly.

Pair Corralation between Nanjing Putian and Shenzhen Sunlord

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to generate 2.07 times more return on investment than Shenzhen Sunlord. However, Nanjing Putian is 2.07 times more volatile than Shenzhen Sunlord Electronics. It trades about 0.09 of its potential returns per unit of risk. Shenzhen Sunlord Electronics is currently generating about 0.04 per unit of risk. If you would invest  318.00  in Nanjing Putian Telecommunications on October 22, 2024 and sell it today you would earn a total of  73.00  from holding Nanjing Putian Telecommunications or generate 22.96% return on investment over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Shenzhen Sunlord Electronics

Nanjing Putian Telec

Risk-Adjusted Performance

7 of 100

OK

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

Shenzhen Sunlord Ele

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Nanjing Putian and Shenzhen Sunlord

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

The idea behind Nanjing Putian Telecommunications and Shenzhen Sunlord Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.