Correlation Between Shenzhen Bingchuan and Shanghai CEO

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

Diversification Opportunities for Shenzhen Bingchuan and Shanghai CEO

0.56

Correlation Coefficient

Shenzhen Bingchuan  Shanghai CEO

Very weak diversification

The 3 months correlation between Shenzhen and Shanghai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ 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 Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Shenzhen Bingchuan i.e., Shenzhen Bingchuan and Shanghai CEO go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and Shanghai CEO

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to under-perform the Shanghai CEO. In addition to that, Shenzhen Bingchuan is 1.57 times more volatile than Shanghai CEO Environmental. It trades about -0.4 of its total potential returns per unit of risk. Shanghai CEO Environmental is currently generating about -0.52 per unit of volatility. If you would invest  1,051  in Shanghai CEO Environmental on October 13, 2024 and sell it today you would lose (255.00) from holding Shanghai CEO Environmental or give up 24.26% 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.  Shanghai CEO Environmental

Shenzhen Bingchuan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bingchuan Network are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bingchuan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai CEO Environmental 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 Shanghai CEO

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

The idea behind Shenzhen Bingchuan Network and Shanghai CEO Environmental 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.