Correlation Between Wuhan Hvsen and Shanghai Ziyan

Can any of the company-specific risk be diversified away by investing in both Wuhan Hvsen and Shanghai Ziyan 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 Wuhan Hvsen and Shanghai Ziyan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wuhan Hvsen Biotechnology and Shanghai Ziyan Foods, you can compare the effects of market volatilities on Wuhan Hvsen and Shanghai Ziyan 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 Wuhan Hvsen with a short position of Shanghai Ziyan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Hvsen and Shanghai Ziyan.

Diversification Opportunities for Wuhan Hvsen and Shanghai Ziyan

0.17

Correlation Coefficient

Wuhan Hvsen  Shanghai Ziyan

Average diversification

The 3 months correlation between Wuhan and Shanghai is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Hvsen Biotechnology and Shanghai Ziyan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Ziyan Foods and Wuhan Hvsen 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 Wuhan Hvsen Biotechnology are associated (or correlated) with Shanghai Ziyan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Ziyan Foods has no effect on the direction of Wuhan Hvsen i.e., Wuhan Hvsen and Shanghai Ziyan go up and down completely randomly.

Pair Corralation between Wuhan Hvsen and Shanghai Ziyan

Assuming the 90 days trading horizon Wuhan Hvsen Biotechnology is expected to under-perform the Shanghai Ziyan. But the stock apears to be less risky and, when comparing its historical volatility, Wuhan Hvsen Biotechnology is 1.26 times less risky than Shanghai Ziyan. The stock trades about -0.09 of its potential returns per unit of risk. The Shanghai Ziyan Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,867  in Shanghai Ziyan Foods on December 3, 2024 and sell it today you would lose (103.00) from holding Shanghai Ziyan Foods or give up 5.52% of portfolio value over 90 days.

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

Wuhan Hvsen Biotechnology  vs.  Shanghai Ziyan Foods

Wuhan Hvsen Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wuhan Hvsen Biotechnology 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.

Shanghai Ziyan Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Wuhan Hvsen and Shanghai Ziyan

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

The idea behind Wuhan Hvsen Biotechnology and Shanghai Ziyan Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.