Correlation Between Yingde Greatchem and Shenzhen Coship

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

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Shenzhen Coship Electronics, you can compare the effects of market volatilities on Yingde Greatchem and Shenzhen Coship 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 Yingde Greatchem with a short position of Shenzhen Coship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Shenzhen Coship.

Diversification Opportunities for Yingde Greatchem and Shenzhen Coship

-0.42

Correlation Coefficient

Yingde Greatchem  Shenzhen Coship

Very good diversification

The 3 months correlation between Yingde and Shenzhen is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Shenzhen Coship Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Coship Elec and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Shenzhen Coship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Coship Elec has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Shenzhen Coship go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Shenzhen Coship

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to generate 0.37 times more return on investment than Shenzhen Coship. However, Yingde Greatchem Chemicals is 2.69 times less risky than Shenzhen Coship. It trades about 0.05 of its potential returns per unit of risk. Shenzhen Coship Electronics is currently generating about -0.02 per unit of risk. If you would invest  2,304  in Yingde Greatchem Chemicals on December 26, 2024 and sell it today you would earn a total of  83.00  from holding Yingde Greatchem Chemicals or generate 3.6% return on investment over 90 days.

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

Yingde Greatchem Chemicals  vs.  Shenzhen Coship Electronics

Yingde Greatchem Che

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yingde Greatchem Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yingde Greatchem is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Coship Elec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Coship Electronics 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 Yingde Greatchem and Shenzhen Coship

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

The idea behind Yingde Greatchem Chemicals and Shenzhen Coship Electronics 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.