Correlation Between Shenzhen Bingchuan and Zhejiang Construction

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

Diversification Opportunities for Shenzhen Bingchuan and Zhejiang Construction

0.75

Correlation Coefficient

Shenzhen Bingchuan  Zhejiang Construction

Poor diversification

The 3 months correlation between Shenzhen and Zhejiang is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction 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 Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of Shenzhen Bingchuan i.e., Shenzhen Bingchuan and Zhejiang Construction go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and Zhejiang Construction

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to generate 1.24 times more return on investment than Zhejiang Construction. However, Shenzhen Bingchuan is 1.24 times more volatile than Zhejiang Construction Investment. It trades about -0.01 of its potential returns per unit of risk. Zhejiang Construction Investment is currently generating about -0.05 per unit of risk. If you would invest  2,028  in Shenzhen Bingchuan Network on October 6, 2024 and sell it today you would lose (203.00) from holding Shenzhen Bingchuan Network or give up 10.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Shenzhen Bingchuan Network  vs.  Zhejiang Construction Investme

Shenzhen Bingchuan

Risk-Adjusted Performance

0 of 100

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.

Zhejiang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Construction Investment 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 Zhejiang Construction

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

The idea behind Shenzhen Bingchuan Network and Zhejiang Construction Investment 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..