Correlation Between Shenzhen SDG and Vatti Corp

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

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

Diversification Opportunities for Shenzhen SDG and Vatti Corp

0.72

Correlation Coefficient

Shenzhen SDG  Vatti Corp

Poor diversification

The 3 months correlation between Shenzhen and Vatti is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Service and Vatti Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vatti Corp and Shenzhen SDG 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 SDG Service are associated (or correlated) with Vatti Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vatti Corp has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Vatti Corp go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Vatti Corp

Assuming the 90 days trading horizon Shenzhen SDG Service is expected to under-perform the Vatti Corp. In addition to that, Shenzhen SDG is 2.2 times more volatile than Vatti Corp. It trades about -0.06 of its total potential returns per unit of risk. Vatti Corp is currently generating about -0.01 per unit of volatility. If you would invest  754.00  in Vatti Corp on October 13, 2024 and sell it today you would lose (26.00) from holding Vatti Corp or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Shenzhen SDG Service  vs.  Vatti Corp

Shenzhen SDG Service

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vatti Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen SDG and Vatti Corp

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

The idea behind Shenzhen SDG Service and Vatti Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.