Correlation Between Gansu Yasheng and Shenzhen Noposion

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

By analyzing existing cross correlation between Gansu Yasheng Industrial and Shenzhen Noposion Agrochemicals, you can compare the effects of market volatilities on Gansu Yasheng and Shenzhen Noposion 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 Gansu Yasheng with a short position of Shenzhen Noposion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gansu Yasheng and Shenzhen Noposion.

Diversification Opportunities for Gansu Yasheng and Shenzhen Noposion

0.4

Correlation Coefficient

Gansu Yasheng  Shenzhen Noposion

Very weak diversification

The 3 months correlation between Gansu and Shenzhen is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Gansu Yasheng Industrial and Shenzhen Noposion Agrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Noposion and Gansu Yasheng 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 Gansu Yasheng Industrial are associated (or correlated) with Shenzhen Noposion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Noposion has no effect on the direction of Gansu Yasheng i.e., Gansu Yasheng and Shenzhen Noposion go up and down completely randomly.

Pair Corralation between Gansu Yasheng and Shenzhen Noposion

Assuming the 90 days trading horizon Gansu Yasheng Industrial is expected to generate 0.7 times more return on investment than Shenzhen Noposion. However, Gansu Yasheng Industrial is 1.43 times less risky than Shenzhen Noposion. It trades about -0.19 of its potential returns per unit of risk. Shenzhen Noposion Agrochemicals is currently generating about -0.25 per unit of risk. If you would invest  303.00  in Gansu Yasheng Industrial on October 20, 2024 and sell it today you would lose (27.00) from holding Gansu Yasheng Industrial or give up 8.91% of portfolio value over 90 days.

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

Gansu Yasheng Industrial  vs.  Shenzhen Noposion Agrochemical

Gansu Yasheng Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Yasheng Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gansu Yasheng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Noposion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Noposion Agrochemicals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Noposion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gansu Yasheng and Shenzhen Noposion

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

The idea behind Gansu Yasheng Industrial and Shenzhen Noposion Agrochemicals 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.

Check out your portfolio center.

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.