Correlation Between Chengdu Kanghua and Shenzhen SDG

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

By analyzing existing cross correlation between Chengdu Kanghua Biological and Shenzhen SDG Service, you can compare the effects of market volatilities on Chengdu Kanghua and Shenzhen SDG 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 Chengdu Kanghua with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Kanghua and Shenzhen SDG.

Diversification Opportunities for Chengdu Kanghua and Shenzhen SDG

0.82

Correlation Coefficient

Chengdu Kanghua  Shenzhen SDG

Very poor diversification

The 3 months correlation between Chengdu and Shenzhen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and Shenzhen SDG Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Service and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Service has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Chengdu Kanghua and Shenzhen SDG

Assuming the 90 days trading horizon Chengdu Kanghua Biological is expected to generate 0.59 times more return on investment than Shenzhen SDG. However, Chengdu Kanghua Biological is 1.7 times less risky than Shenzhen SDG. It trades about 0.01 of its potential returns per unit of risk. Shenzhen SDG Service is currently generating about -0.08 per unit of risk. If you would invest  5,810  in Chengdu Kanghua Biological on December 10, 2024 and sell it today you would earn a total of  24.00  from holding Chengdu Kanghua Biological or generate 0.41% return on investment over 90 days.

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

Chengdu Kanghua Biological  vs.  Shenzhen SDG Service

Chengdu Kanghua Biol

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Kanghua Biological are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chengdu Kanghua is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen SDG Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen SDG Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chengdu Kanghua and Shenzhen SDG

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

The idea behind Chengdu Kanghua Biological and Shenzhen SDG Service 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.