Correlation Between Shenzhen Kexin and Industrial

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

Diversification Opportunities for Shenzhen Kexin and Industrial

0.33

Correlation Coefficient

Shenzhen Kexin  Industrial

Weak diversification

The 3 months correlation between Shenzhen and Industrial is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kexin Communication and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Shenzhen Kexin i.e., Shenzhen Kexin and Industrial go up and down completely randomly.

Pair Corralation between Shenzhen Kexin and Industrial

Assuming the 90 days trading horizon Shenzhen Kexin Communication is expected to generate 2.89 times more return on investment than Industrial. However, Shenzhen Kexin is 2.89 times more volatile than Industrial and Commercial. It trades about 0.12 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.09 per unit of risk. If you would invest  1,081  in Shenzhen Kexin Communication on September 4, 2024 and sell it today you would earn a total of  298.00  from holding Shenzhen Kexin Communication or generate 27.57% return on investment over 90 days.

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

Shenzhen Kexin Communication  vs.  Industrial and Commercial

Shenzhen Kexin Commu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Kexin sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shenzhen Kexin and Industrial

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

The idea behind Shenzhen Kexin Communication and Industrial and Commercial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..