Correlation Between Huaxia Fund and Shenzhen

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

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

Diversification Opportunities for Huaxia Fund and Shenzhen

0.37

Correlation Coefficient

Huaxia Fund  Shenzhen

Weak diversification

The 3 months correlation between Huaxia and Shenzhen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Huaxia Fund Management and Shenzhen AV Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen AV Display and Huaxia Fund 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 Huaxia Fund Management are associated (or correlated) with Shenzhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen AV Display has no effect on the direction of Huaxia Fund i.e., Huaxia Fund and Shenzhen go up and down completely randomly.

Pair Corralation between Huaxia Fund and Shenzhen

Assuming the 90 days trading horizon Huaxia Fund Management is expected to generate 0.5 times more return on investment than Shenzhen. However, Huaxia Fund Management is 1.98 times less risky than Shenzhen. It trades about 0.46 of its potential returns per unit of risk. Shenzhen AV Display Co is currently generating about -0.19 per unit of risk. If you would invest  261.00  in Huaxia Fund Management on October 8, 2024 and sell it today you would earn a total of  41.00  from holding Huaxia Fund Management or generate 15.71% return on investment over 90 days.

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

Huaxia Fund Management  vs.  Shenzhen AV Display Co

Huaxia Fund Management

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Fund Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Huaxia Fund and Shenzhen

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

The idea behind Huaxia Fund Management and Shenzhen AV Display 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.