Correlation Between Shenzhen Mindray and Xiamen ITG

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

Diversification Opportunities for Shenzhen Mindray and Xiamen ITG

0.81

Correlation Coefficient

Shenzhen Mindray  Xiamen ITG

Very poor diversification

The 3 months correlation between Shenzhen and Xiamen is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Xiamen ITG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen ITG Group 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 Xiamen ITG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen ITG Group has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Xiamen ITG go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Xiamen ITG

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to under-perform the Xiamen ITG. In addition to that, Shenzhen Mindray is 1.38 times more volatile than Xiamen ITG Group. It trades about -0.2 of its total potential returns per unit of risk. Xiamen ITG Group is currently generating about -0.08 per unit of volatility. If you would invest  680.00  in Xiamen ITG Group on September 22, 2024 and sell it today you would lose (17.00) from holding Xiamen ITG Group or give up 2.5% of portfolio value over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Xiamen ITG Group

Shenzhen Mindray Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray sustained solid returns over the last few months and may actually be approaching a breakup point.

Xiamen ITG Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen ITG Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen ITG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and Xiamen ITG

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

The idea behind Shenzhen Mindray Bio Medical and Xiamen ITG Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.