Correlation Between State Grid and Shenzhen New

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

By analyzing existing cross correlation between State Grid InformationCommunication and Shenzhen New Nanshan, you can compare the effects of market volatilities on State Grid and Shenzhen New 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 State Grid with a short position of Shenzhen New. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Shenzhen New.

Diversification Opportunities for State Grid and Shenzhen New

0.45

Correlation Coefficient

State Grid  Shenzhen New

Very weak diversification

The 3 months correlation between State and Shenzhen is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Shenzhen New Nanshan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen New Nanshan and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Shenzhen New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen New Nanshan has no effect on the direction of State Grid i.e., State Grid and Shenzhen New go up and down completely randomly.

Pair Corralation between State Grid and Shenzhen New

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to generate 1.28 times more return on investment than Shenzhen New. However, State Grid is 1.28 times more volatile than Shenzhen New Nanshan. It trades about -0.01 of its potential returns per unit of risk. Shenzhen New Nanshan is currently generating about -0.05 per unit of risk. If you would invest  1,975  in State Grid InformationCommunication on December 26, 2024 and sell it today you would lose (52.00) from holding State Grid InformationCommunication or give up 2.63% of portfolio value over 90 days.

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

State Grid InformationCommunic  vs.  Shenzhen New Nanshan

State Grid Informati

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Grid InformationCommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, State Grid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen New Nanshan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen New Nanshan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Grid and Shenzhen New

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

The idea behind State Grid InformationCommunication and Shenzhen New Nanshan 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.