Correlation Between Shenzhen Sunway and Financial Street

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Can any of the company-specific risk be diversified away by investing in both Shenzhen Sunway and Financial Street 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 Sunway and Financial Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shenzhen Sunway Communication and Financial Street Holdings, you can compare the effects of market volatilities on Shenzhen Sunway and Financial Street 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 Sunway with a short position of Financial Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Sunway and Financial Street.

Diversification Opportunities for Shenzhen Sunway and Financial Street

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shenzhen and Financial is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Sunway Communication and Financial Street Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Street Holdings and Shenzhen Sunway 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 Sunway Communication are associated (or correlated) with Financial Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Street Holdings has no effect on the direction of Shenzhen Sunway i.e., Shenzhen Sunway and Financial Street go up and down completely randomly.

Pair Corralation between Shenzhen Sunway and Financial Street

Assuming the 90 days trading horizon Shenzhen Sunway Communication is expected to generate 1.26 times more return on investment than Financial Street. However, Shenzhen Sunway is 1.26 times more volatile than Financial Street Holdings. It trades about 0.04 of its potential returns per unit of risk. Financial Street Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,653  in Shenzhen Sunway Communication on October 4, 2024 and sell it today you would earn a total of  891.00  from holding Shenzhen Sunway Communication or generate 53.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shenzhen Sunway Communication  vs.  Financial Street Holdings

 Performance 
       Timeline  
Shenzhen Sunway Comm 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Financial Street Holdings 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 Sunway and Financial Street Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen Sunway and Financial Street

The main advantage of trading using opposite Shenzhen Sunway and Financial Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Sunway position performs unexpectedly, Financial Street 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 Financial Street will offset losses from the drop in Financial Street's long position.
The idea behind Shenzhen Sunway Communication and Financial Street Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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