Correlation Between Shenzhen Bingchuan and FSPG Hi-Tech

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

By analyzing existing cross correlation between Shenzhen Bingchuan Network and FSPG Hi Tech Co, you can compare the effects of market volatilities on Shenzhen Bingchuan and FSPG Hi-Tech 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 Bingchuan with a short position of FSPG Hi-Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Bingchuan and FSPG Hi-Tech.

Diversification Opportunities for Shenzhen Bingchuan and FSPG Hi-Tech

0.49

Correlation Coefficient

Shenzhen Bingchuan  FSPG Hi-Tech

Very weak diversification

The 3 months correlation between Shenzhen and FSPG is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network and FSPG Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSPG Hi Tech and Shenzhen Bingchuan 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 Bingchuan Network are associated (or correlated) with FSPG Hi-Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSPG Hi Tech has no effect on the direction of Shenzhen Bingchuan i.e., Shenzhen Bingchuan and FSPG Hi-Tech go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and FSPG Hi-Tech

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to generate 1.22 times more return on investment than FSPG Hi-Tech. However, Shenzhen Bingchuan is 1.22 times more volatile than FSPG Hi Tech Co. It trades about -0.02 of its potential returns per unit of risk. FSPG Hi Tech Co is currently generating about -0.05 per unit of risk. If you would invest  2,445  in Shenzhen Bingchuan Network on December 1, 2024 and sell it today you would lose (176.00) from holding Shenzhen Bingchuan Network or give up 7.2% of portfolio value over 90 days.

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

Shenzhen Bingchuan Network  vs.  FSPG Hi Tech Co

Shenzhen Bingchuan

Risk-Adjusted Performance

Very Weak

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

FSPG Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days FSPG Hi Tech Co 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 Shenzhen Bingchuan and FSPG Hi-Tech

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

The idea behind Shenzhen Bingchuan Network and FSPG Hi Tech Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.