Correlation Between Chongqing Road and Shenzhen Sunlord

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

By analyzing existing cross correlation between Chongqing Road Bridge and Shenzhen Sunlord Electronics, you can compare the effects of market volatilities on Chongqing Road and Shenzhen Sunlord 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 Chongqing Road with a short position of Shenzhen Sunlord. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Road and Shenzhen Sunlord.

Diversification Opportunities for Chongqing Road and Shenzhen Sunlord

0.24

Correlation Coefficient

Chongqing Road  Shenzhen Sunlord

Modest diversification

The 3 months correlation between Chongqing and Shenzhen is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Road Bridge and Shenzhen Sunlord Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunlord Ele and Chongqing Road 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 Chongqing Road Bridge are associated (or correlated) with Shenzhen Sunlord. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunlord Ele has no effect on the direction of Chongqing Road i.e., Chongqing Road and Shenzhen Sunlord go up and down completely randomly.

Pair Corralation between Chongqing Road and Shenzhen Sunlord

Assuming the 90 days trading horizon Chongqing Road Bridge is expected to under-perform the Shenzhen Sunlord. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Road Bridge is 1.01 times less risky than Shenzhen Sunlord. The stock trades about -0.11 of its potential returns per unit of risk. The Shenzhen Sunlord Electronics is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,213  in Shenzhen Sunlord Electronics on October 24, 2024 and sell it today you would lose (145.00) from holding Shenzhen Sunlord Electronics or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Chongqing Road Bridge  vs.  Shenzhen Sunlord Electronics

Chongqing Road Bridge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Road Bridge 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.

Shenzhen Sunlord Ele

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Sunlord Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Sunlord may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chongqing Road and Shenzhen Sunlord

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

The idea behind Chongqing Road Bridge and Shenzhen Sunlord Electronics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.