Correlation Between Shenzhen Kexin and Wuhan Yangtze

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

Diversification Opportunities for Shenzhen Kexin and Wuhan Yangtze

0.61

Correlation Coefficient

Shenzhen Kexin  Wuhan Yangtze

Poor diversification

The 3 months correlation between Shenzhen and Wuhan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kexin Communication and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun 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 Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Shenzhen Kexin i.e., Shenzhen Kexin and Wuhan Yangtze go up and down completely randomly.

Pair Corralation between Shenzhen Kexin and Wuhan Yangtze

Assuming the 90 days trading horizon Shenzhen Kexin is expected to generate 2.65 times less return on investment than Wuhan Yangtze. In addition to that, Shenzhen Kexin is 1.29 times more volatile than Wuhan Yangtze Communication. It trades about 0.01 of its total potential returns per unit of risk. Wuhan Yangtze Communication is currently generating about 0.05 per unit of volatility. If you would invest  2,480  in Wuhan Yangtze Communication on December 26, 2024 and sell it today you would earn a total of  170.00  from holding Wuhan Yangtze Communication or generate 6.85% return on investment over 90 days.

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

Shenzhen Kexin Communication  vs.  Wuhan Yangtze Communication

Shenzhen Kexin Commu

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Wuhan Yangtze Commun

Risk-Adjusted Performance

Modest

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

Pair Trading with Shenzhen Kexin and Wuhan Yangtze

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

The idea behind Shenzhen Kexin Communication and Wuhan Yangtze Communication 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.