Correlation Between Shenzhen and Chinese Universe

Can any of the company-specific risk be diversified away by investing in both Shenzhen and Chinese Universe 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 Chinese Universe 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 Chinese Universe Publishing, you can compare the effects of market volatilities on Shenzhen and Chinese Universe 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 Chinese Universe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen and Chinese Universe.

Diversification Opportunities for Shenzhen and Chinese Universe

0.59

Correlation Coefficient

Shenzhen  Chinese Universe

Very weak diversification

The 3 months correlation between Shenzhen and Chinese is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen AV Display Co and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub 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 Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of Shenzhen i.e., Shenzhen and Chinese Universe go up and down completely randomly.

Pair Corralation between Shenzhen and Chinese Universe

Assuming the 90 days trading horizon Shenzhen AV Display Co is expected to generate 1.6 times more return on investment than Chinese Universe. However, Shenzhen is 1.6 times more volatile than Chinese Universe Publishing. It trades about -0.07 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.11 per unit of risk. If you would invest  3,515  in Shenzhen AV Display Co on December 1, 2024 and sell it today you would lose (401.00) from holding Shenzhen AV Display Co or give up 11.41% of portfolio value over 90 days.

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

Shenzhen AV Display Co  vs.  Chinese Universe Publishing

Shenzhen AV Display

Risk-Adjusted Performance

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.

Chinese Universe Pub

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinese Universe Publishing 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.

Pair Trading with Shenzhen and Chinese Universe

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

The idea behind Shenzhen AV Display Co and Chinese Universe Publishing 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 Commodity Directory module to find actively traded commodities issued by global exchanges.