Correlation Between Vats Liquor and Shenzhen Fortune

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

By analyzing existing cross correlation between Vats Liquor Chain and Shenzhen Fortune Trend, you can compare the effects of market volatilities on Vats Liquor and Shenzhen Fortune 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 Vats Liquor with a short position of Shenzhen Fortune. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Shenzhen Fortune.

Diversification Opportunities for Vats Liquor and Shenzhen Fortune

0.73

Correlation Coefficient

Vats Liquor  Shenzhen Fortune

Poor diversification

The 3 months correlation between Vats and Shenzhen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Shenzhen Fortune Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Fortune Trend and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Shenzhen Fortune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Fortune Trend has no effect on the direction of Vats Liquor i.e., Vats Liquor and Shenzhen Fortune go up and down completely randomly.

Pair Corralation between Vats Liquor and Shenzhen Fortune

Assuming the 90 days trading horizon Vats Liquor is expected to generate 31.33 times less return on investment than Shenzhen Fortune. But when comparing it to its historical volatility, Vats Liquor Chain is 1.43 times less risky than Shenzhen Fortune. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Fortune Trend is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,330  in Shenzhen Fortune Trend on October 5, 2024 and sell it today you would earn a total of  2,820  from holding Shenzhen Fortune Trend or generate 21.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

Vats Liquor Chain  vs.  Shenzhen Fortune Trend

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Fortune Trend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Fortune Trend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vats Liquor and Shenzhen Fortune

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

The idea behind Vats Liquor Chain and Shenzhen Fortune Trend 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.