Correlation Between Shenzhen Kexin and China Molybdenum

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

Diversification Opportunities for Shenzhen Kexin and China Molybdenum

0.47

Correlation Coefficient

Shenzhen Kexin  China Molybdenum

Very weak diversification

The 3 months correlation between Shenzhen and China is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Kexin Communication and China Molybdenum Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Molybdenum 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 China Molybdenum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Molybdenum has no effect on the direction of Shenzhen Kexin i.e., Shenzhen Kexin and China Molybdenum go up and down completely randomly.

Pair Corralation between Shenzhen Kexin and China Molybdenum

Assuming the 90 days trading horizon Shenzhen Kexin Communication is expected to generate 1.69 times more return on investment than China Molybdenum. However, Shenzhen Kexin is 1.69 times more volatile than China Molybdenum Co. It trades about -0.04 of its potential returns per unit of risk. China Molybdenum Co is currently generating about -0.28 per unit of risk. If you would invest  1,462  in Shenzhen Kexin Communication on September 21, 2024 and sell it today you would lose (45.00) from holding Shenzhen Kexin Communication or give up 3.08% of portfolio value over 90 days.

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

Shenzhen Kexin Communication  vs.  China Molybdenum Co

Shenzhen Kexin Commu

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Kexin Communication are ranked lower than 11 (%) 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.

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Molybdenum 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 Kexin and China Molybdenum

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

The idea behind Shenzhen Kexin Communication and China Molybdenum Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.