Correlation Between ButOne Information and Shenzhen SDG

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

By analyzing existing cross correlation between ButOne Information Corp and Shenzhen SDG Service, you can compare the effects of market volatilities on ButOne Information and Shenzhen SDG 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 ButOne Information with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ButOne Information and Shenzhen SDG.

Diversification Opportunities for ButOne Information and Shenzhen SDG

0.65

Correlation Coefficient

ButOne Information  Shenzhen SDG

Poor diversification

The 3 months correlation between ButOne and Shenzhen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ButOne Information Corp and Shenzhen SDG Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Service and ButOne Information 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 ButOne Information Corp are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Service has no effect on the direction of ButOne Information i.e., ButOne Information and Shenzhen SDG go up and down completely randomly.

Pair Corralation between ButOne Information and Shenzhen SDG

Assuming the 90 days trading horizon ButOne Information is expected to generate 1.91 times less return on investment than Shenzhen SDG. But when comparing it to its historical volatility, ButOne Information Corp is 1.82 times less risky than Shenzhen SDG. It trades about 0.11 of its potential returns per unit of risk. Shenzhen SDG Service is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,545  in Shenzhen SDG Service on September 25, 2024 and sell it today you would earn a total of  1,607  from holding Shenzhen SDG Service or generate 45.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

ButOne Information Corp  vs.  Shenzhen SDG Service

ButOne Information Corp

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ButOne Information Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ButOne Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen SDG Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen SDG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ButOne Information and Shenzhen SDG

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

The idea behind ButOne Information Corp and Shenzhen SDG Service 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.