Correlation Between Guangdong Wens and Shenzhen United

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

By analyzing existing cross correlation between Guangdong Wens Foodstuff and Shenzhen United Winners, you can compare the effects of market volatilities on Guangdong Wens and Shenzhen United 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 Guangdong Wens with a short position of Shenzhen United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Wens and Shenzhen United.

Diversification Opportunities for Guangdong Wens and Shenzhen United

-0.18

Correlation Coefficient

Guangdong Wens  Shenzhen United

Good diversification

The 3 months correlation between Guangdong and Shenzhen is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Wens Foodstuff and Shenzhen United Winners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen United Winners and Guangdong Wens 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 Guangdong Wens Foodstuff are associated (or correlated) with Shenzhen United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen United Winners has no effect on the direction of Guangdong Wens i.e., Guangdong Wens and Shenzhen United go up and down completely randomly.

Pair Corralation between Guangdong Wens and Shenzhen United

Assuming the 90 days trading horizon Guangdong Wens Foodstuff is expected to under-perform the Shenzhen United. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Wens Foodstuff is 2.78 times less risky than Shenzhen United. The stock trades about -0.12 of its potential returns per unit of risk. The Shenzhen United Winners is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Shenzhen United Winners on October 11, 2024 and sell it today you would earn a total of  62.00  from holding Shenzhen United Winners or generate 4.43% return on investment over 90 days.

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

Guangdong Wens Foodstuff  vs.  Shenzhen United Winners

Guangdong Wens Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangdong Wens Foodstuff 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 United Winners

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen United Winners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen United may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guangdong Wens and Shenzhen United

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

The idea behind Guangdong Wens Foodstuff and Shenzhen United Winners 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .