Correlation Between Shenzhen Bingchuan and Guangzhou KingTeller

Can any of the company-specific risk be diversified away by investing in both Shenzhen Bingchuan and Guangzhou KingTeller 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 Guangzhou KingTeller 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 Guangzhou KingTeller Technology, you can compare the effects of market volatilities on Shenzhen Bingchuan and Guangzhou KingTeller 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 Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Bingchuan and Guangzhou KingTeller.

Diversification Opportunities for Shenzhen Bingchuan and Guangzhou KingTeller

0.52

Correlation Coefficient

Shenzhen Bingchuan  Guangzhou KingTeller

Very weak diversification

The 3 months correlation between Shenzhen and Guangzhou is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller 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 Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of Shenzhen Bingchuan i.e., Shenzhen Bingchuan and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and Guangzhou KingTeller

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to generate 0.92 times more return on investment than Guangzhou KingTeller. However, Shenzhen Bingchuan Network is 1.09 times less risky than Guangzhou KingTeller. It trades about 0.1 of its potential returns per unit of risk. Guangzhou KingTeller Technology is currently generating about 0.0 per unit of risk. If you would invest  2,068  in Shenzhen Bingchuan Network on December 28, 2024 and sell it today you would earn a total of  343.00  from holding Shenzhen Bingchuan Network or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Shenzhen Bingchuan Network  vs.  Guangzhou KingTeller Technolog

Shenzhen Bingchuan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bingchuan Network are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bingchuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shenzhen Bingchuan and Guangzhou KingTeller

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

The idea behind Shenzhen Bingchuan Network and Guangzhou KingTeller Technology 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.