Correlation Between Shengyuan Environmental and Shenzhen MYS

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

By analyzing existing cross correlation between Shengyuan Environmental Protection and Shenzhen MYS Environmental, you can compare the effects of market volatilities on Shengyuan Environmental and Shenzhen MYS 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 Shengyuan Environmental with a short position of Shenzhen MYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengyuan Environmental and Shenzhen MYS.

Diversification Opportunities for Shengyuan Environmental and Shenzhen MYS

0.66

Correlation Coefficient

Shengyuan Environmental  Shenzhen MYS

Poor diversification

The 3 months correlation between Shengyuan and Shenzhen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shengyuan Environmental Protec and Shenzhen MYS Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MYS Environ and Shengyuan Environmental 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 Shengyuan Environmental Protection are associated (or correlated) with Shenzhen MYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MYS Environ has no effect on the direction of Shengyuan Environmental i.e., Shengyuan Environmental and Shenzhen MYS go up and down completely randomly.

Pair Corralation between Shengyuan Environmental and Shenzhen MYS

Assuming the 90 days trading horizon Shengyuan Environmental Protection is expected to generate 0.66 times more return on investment than Shenzhen MYS. However, Shengyuan Environmental Protection is 1.52 times less risky than Shenzhen MYS. It trades about 0.03 of its potential returns per unit of risk. Shenzhen MYS Environmental is currently generating about -0.01 per unit of risk. If you would invest  1,335  in Shengyuan Environmental Protection on December 27, 2024 and sell it today you would earn a total of  20.00  from holding Shengyuan Environmental Protection or generate 1.5% return on investment over 90 days.

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

Shengyuan Environmental Protec  vs.  Shenzhen MYS Environmental

Shengyuan Environmental

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shengyuan Environmental Protection are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shengyuan Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen MYS Environ

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shengyuan Environmental and Shenzhen MYS

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

The idea behind Shengyuan Environmental Protection and Shenzhen MYS Environmental 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.