Correlation Between BlueFocus Communication and Shenzhen SDG

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

By analyzing existing cross correlation between BlueFocus Communication Group and Shenzhen SDG Information, you can compare the effects of market volatilities on BlueFocus Communication and Shenzhen SDG 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 BlueFocus Communication with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueFocus Communication and Shenzhen SDG.

Diversification Opportunities for BlueFocus Communication and Shenzhen SDG

0.48

Correlation Coefficient

BlueFocus Communication  Shenzhen SDG

Very weak diversification

The 3 months correlation between BlueFocus and Shenzhen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BlueFocus Communication Group and Shenzhen SDG Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Information and BlueFocus Communication 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 BlueFocus Communication Group are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Information has no effect on the direction of BlueFocus Communication i.e., BlueFocus Communication and Shenzhen SDG go up and down completely randomly.

Pair Corralation between BlueFocus Communication and Shenzhen SDG

Assuming the 90 days trading horizon BlueFocus Communication Group is expected to generate 2.37 times more return on investment than Shenzhen SDG. However, BlueFocus Communication is 2.37 times more volatile than Shenzhen SDG Information. It trades about 0.02 of its potential returns per unit of risk. Shenzhen SDG Information is currently generating about 0.02 per unit of risk. If you would invest  964.00  in BlueFocus Communication Group on December 29, 2024 and sell it today you would earn a total of  2.00  from holding BlueFocus Communication Group or generate 0.21% return on investment over 90 days.

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

BlueFocus Communication Group  vs.  Shenzhen SDG Information

BlueFocus Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlueFocus Communication Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlueFocus Communication may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shenzhen SDG Information

Risk-Adjusted Performance

Weak

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

Pair Trading with BlueFocus Communication and Shenzhen SDG

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

The idea behind BlueFocus Communication Group and Shenzhen SDG Information 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.