Correlation Between East Money and Shenzhen Agricultural

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

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

Diversification Opportunities for East Money and Shenzhen Agricultural

0.75

Correlation Coefficient

East Money  Shenzhen Agricultural

Poor diversification

The 3 months correlation between East and Shenzhen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding East Money Information and Shenzhen Agricultural Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Agricultural and East Money 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 East Money Information are associated (or correlated) with Shenzhen Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Agricultural has no effect on the direction of East Money i.e., East Money and Shenzhen Agricultural go up and down completely randomly.

Pair Corralation between East Money and Shenzhen Agricultural

Assuming the 90 days trading horizon East Money Information is expected to under-perform the Shenzhen Agricultural. In addition to that, East Money is 1.34 times more volatile than Shenzhen Agricultural Products. It trades about -0.08 of its total potential returns per unit of risk. Shenzhen Agricultural Products is currently generating about -0.09 per unit of volatility. If you would invest  711.00  in Shenzhen Agricultural Products on December 26, 2024 and sell it today you would lose (76.00) from holding Shenzhen Agricultural Products or give up 10.69% of portfolio value over 90 days.

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

East Money Information  vs.  Shenzhen Agricultural Products

East Money Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Money Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Agricultural

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Agricultural Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with East Money and Shenzhen Agricultural

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

The idea behind East Money Information and Shenzhen Agricultural Products 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.