Correlation Between Shantou Wanshun and Shanghai Ziyan

Can any of the company-specific risk be diversified away by investing in both Shantou Wanshun and Shanghai Ziyan 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 Shantou Wanshun and Shanghai Ziyan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shantou Wanshun Package and Shanghai Ziyan Foods, you can compare the effects of market volatilities on Shantou Wanshun and Shanghai Ziyan 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 Shantou Wanshun with a short position of Shanghai Ziyan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Shanghai Ziyan.

Diversification Opportunities for Shantou Wanshun and Shanghai Ziyan

0.01

Correlation Coefficient

Shantou Wanshun  Shanghai Ziyan

Significant diversification

The 3 months correlation between Shantou and Shanghai is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Shanghai Ziyan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Ziyan Foods and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Shanghai Ziyan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Ziyan Foods has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Shanghai Ziyan go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Shanghai Ziyan

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the Shanghai Ziyan. But the stock apears to be less risky and, when comparing its historical volatility, Shantou Wanshun Package is 2.22 times less risky than Shanghai Ziyan. The stock trades about -0.39 of its potential returns per unit of risk. The Shanghai Ziyan Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,874  in Shanghai Ziyan Foods on October 3, 2024 and sell it today you would earn a total of  135.00  from holding Shanghai Ziyan Foods or generate 7.2% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Shanghai Ziyan Foods

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shanghai Ziyan Foods

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Ziyan Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Ziyan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shantou Wanshun and Shanghai Ziyan

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

The idea behind Shantou Wanshun Package and Shanghai Ziyan Foods 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..