Correlation Between Shenzhen Mindray and Changjiang Publishing

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

Diversification Opportunities for Shenzhen Mindray and Changjiang Publishing

0.32

Correlation Coefficient

Shenzhen Mindray  Changjiang Publishing

Weak diversification

The 3 months correlation between Shenzhen and Changjiang is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Changjiang Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Publishing 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 Changjiang Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Publishing has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Changjiang Publishing go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Changjiang Publishing

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to generate 1.34 times more return on investment than Changjiang Publishing. However, Shenzhen Mindray is 1.34 times more volatile than Changjiang Publishing Media. It trades about 0.08 of its potential returns per unit of risk. Changjiang Publishing Media is currently generating about 0.06 per unit of risk. If you would invest  23,028  in Shenzhen Mindray Bio Medical on September 13, 2024 and sell it today you would earn a total of  3,202  from holding Shenzhen Mindray Bio Medical or generate 13.9% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Changjiang Publishing Media

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.

Changjiang Publishing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Publishing Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Publishing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shenzhen Mindray and Changjiang Publishing

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

The idea behind Shenzhen Mindray Bio Medical and Changjiang Publishing Media 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.