Correlation Between Shenzhen and Zangge Holding

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

By analyzing existing cross correlation between Shenzhen AV Display Co and Zangge Holding Co, you can compare the effects of market volatilities on Shenzhen and Zangge Holding 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 with a short position of Zangge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen and Zangge Holding.

Diversification Opportunities for Shenzhen and Zangge Holding

-0.07

Correlation Coefficient

Shenzhen  Zangge Holding

Good diversification

The 3 months correlation between Shenzhen and Zangge is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen AV Display Co and Zangge Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zangge Holding and Shenzhen 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 AV Display Co are associated (or correlated) with Zangge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zangge Holding has no effect on the direction of Shenzhen i.e., Shenzhen and Zangge Holding go up and down completely randomly.

Pair Corralation between Shenzhen and Zangge Holding

Assuming the 90 days trading horizon Shenzhen AV Display Co is expected to generate 1.81 times more return on investment than Zangge Holding. However, Shenzhen is 1.81 times more volatile than Zangge Holding Co. It trades about 0.02 of its potential returns per unit of risk. Zangge Holding Co is currently generating about 0.03 per unit of risk. If you would invest  2,976  in Shenzhen AV Display Co on October 13, 2024 and sell it today you would lose (75.00) from holding Shenzhen AV Display Co or give up 2.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Shenzhen AV Display Co  vs.  Zangge Holding Co

Shenzhen AV Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen AV Display Co 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.

Zangge Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zangge Holding Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zangge Holding may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shenzhen and Zangge Holding

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

The idea behind Shenzhen AV Display Co and Zangge Holding Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.