Correlation Between Shenzhen Changfang and Shenzhen Hifuture

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

By analyzing existing cross correlation between Shenzhen Changfang Light and Shenzhen Hifuture Electric, you can compare the effects of market volatilities on Shenzhen Changfang and Shenzhen Hifuture 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 Changfang with a short position of Shenzhen Hifuture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Changfang and Shenzhen Hifuture.

Diversification Opportunities for Shenzhen Changfang and Shenzhen Hifuture

0.07

Correlation Coefficient

Shenzhen Changfang  Shenzhen Hifuture

Significant diversification

The 3 months correlation between Shenzhen and Shenzhen is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Changfang Light and Shenzhen Hifuture Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Hifuture and Shenzhen Changfang 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 Changfang Light are associated (or correlated) with Shenzhen Hifuture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Hifuture has no effect on the direction of Shenzhen Changfang i.e., Shenzhen Changfang and Shenzhen Hifuture go up and down completely randomly.

Pair Corralation between Shenzhen Changfang and Shenzhen Hifuture

Assuming the 90 days trading horizon Shenzhen Changfang Light is expected to generate 1.05 times more return on investment than Shenzhen Hifuture. However, Shenzhen Changfang is 1.05 times more volatile than Shenzhen Hifuture Electric. It trades about 0.01 of its potential returns per unit of risk. Shenzhen Hifuture Electric is currently generating about -0.03 per unit of risk. If you would invest  188.00  in Shenzhen Changfang Light on December 4, 2024 and sell it today you would lose (17.00) from holding Shenzhen Changfang Light or give up 9.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Shenzhen Changfang Light  vs.  Shenzhen Hifuture Electric

Shenzhen Changfang Light

Risk-Adjusted Performance

Very Weak

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

Shenzhen Hifuture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Hifuture Electric 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shenzhen Changfang and Shenzhen Hifuture

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

The idea behind Shenzhen Changfang Light and Shenzhen Hifuture Electric 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.