Correlation Between Shenzhen Mindray and Zhejiang Qianjiang

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

By analyzing existing cross correlation between Shenzhen Mindray Bio Medical and Zhejiang Qianjiang Motorcycle, you can compare the effects of market volatilities on Shenzhen Mindray and Zhejiang Qianjiang 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 Mindray with a short position of Zhejiang Qianjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Mindray and Zhejiang Qianjiang.

Diversification Opportunities for Shenzhen Mindray and Zhejiang Qianjiang

-0.43

Correlation Coefficient

Shenzhen Mindray  Zhejiang Qianjiang

Very good diversification

The 3 months correlation between Shenzhen and Zhejiang is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Zhejiang Qianjiang Motorcycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Qianjiang and Shenzhen Mindray 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 Mindray Bio Medical are associated (or correlated) with Zhejiang Qianjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Qianjiang has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Zhejiang Qianjiang go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Zhejiang Qianjiang

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the Zhejiang Qianjiang. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Mindray Bio Medical is 1.62 times less risky than Zhejiang Qianjiang. The stock trades about -0.02 of its potential returns per unit of risk. The Zhejiang Qianjiang Motorcycle is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,632  in Zhejiang Qianjiang Motorcycle on November 28, 2024 and sell it today you would earn a total of  235.00  from holding Zhejiang Qianjiang Motorcycle or generate 14.4% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Zhejiang Qianjiang Motorcycle

Shenzhen Mindray Bio

Risk-Adjusted Performance

Very Weak

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

Zhejiang Qianjiang

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and Zhejiang Qianjiang

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

The idea behind Shenzhen Mindray Bio Medical and Zhejiang Qianjiang Motorcycle 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.