Correlation Between Shenzhen Bingchuan and Shenzhen United

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

Diversification Opportunities for Shenzhen Bingchuan and Shenzhen United

0.86

Correlation Coefficient

Shenzhen Bingchuan  Shenzhen United

Very poor diversification

The 3 months correlation between Shenzhen and Shenzhen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network 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 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 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 Shenzhen Bingchuan i.e., Shenzhen Bingchuan and Shenzhen United go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and Shenzhen United

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to generate 2.02 times more return on investment than Shenzhen United. However, Shenzhen Bingchuan is 2.02 times more volatile than Shenzhen United Winners. It trades about -0.16 of its potential returns per unit of risk. Shenzhen United Winners is currently generating about -0.66 per unit of risk. If you would invest  2,272  in Shenzhen Bingchuan Network on October 5, 2024 and sell it today you would lose (330.00) from holding Shenzhen Bingchuan Network or give up 14.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Shenzhen Bingchuan Network  vs.  Shenzhen United Winners

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.

Shenzhen United Winners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen United Winners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen United 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 Shenzhen United

The main advantage of trading using opposite Shenzhen Bingchuan and Shenzhen United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Bingchuan 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 Shenzhen Bingchuan Network 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.