Correlation Between Shenzhen Kexin and Jiaozuo Wanfang

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

By analyzing existing cross correlation between Shenzhen Kexin Communication and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on Shenzhen Kexin and Jiaozuo Wanfang 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 Kexin with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Kexin and Jiaozuo Wanfang.

Diversification Opportunities for Shenzhen Kexin and Jiaozuo Wanfang

0.85

Correlation Coefficient

Shenzhen Kexin  Jiaozuo Wanfang

Very poor diversification

The 3 months correlation between Shenzhen and Jiaozuo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kexin Communication and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Shenzhen Kexin 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 Kexin Communication are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Shenzhen Kexin i.e., Shenzhen Kexin and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Shenzhen Kexin and Jiaozuo Wanfang

Assuming the 90 days trading horizon Shenzhen Kexin Communication is expected to under-perform the Jiaozuo Wanfang. In addition to that, Shenzhen Kexin is 1.43 times more volatile than Jiaozuo Wanfang Aluminum. It trades about -0.2 of its total potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.01 per unit of volatility. If you would invest  680.00  in Jiaozuo Wanfang Aluminum on October 11, 2024 and sell it today you would lose (1.00) from holding Jiaozuo Wanfang Aluminum or give up 0.15% of portfolio value over 90 days.

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

Shenzhen Kexin Communication  vs.  Jiaozuo Wanfang Aluminum

Shenzhen Kexin Commu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen Kexin and Jiaozuo Wanfang

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

The idea behind Shenzhen Kexin Communication and Jiaozuo Wanfang Aluminum 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.