Correlation Between Shanghai Broadband and Wuxi Dk

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

By analyzing existing cross correlation between Shanghai Broadband Technology and Wuxi Dk Electronic, you can compare the effects of market volatilities on Shanghai Broadband and Wuxi Dk 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 Shanghai Broadband with a short position of Wuxi Dk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Broadband and Wuxi Dk.

Diversification Opportunities for Shanghai Broadband and Wuxi Dk

0.6

Correlation Coefficient

Shanghai Broadband  Wuxi Dk

Poor diversification

The 3 months correlation between Shanghai and Wuxi is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Broadband Technology and Wuxi Dk Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Dk Electronic and Shanghai Broadband 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 Shanghai Broadband Technology are associated (or correlated) with Wuxi Dk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Dk Electronic has no effect on the direction of Shanghai Broadband i.e., Shanghai Broadband and Wuxi Dk go up and down completely randomly.

Pair Corralation between Shanghai Broadband and Wuxi Dk

Assuming the 90 days trading horizon Shanghai Broadband Technology is expected to generate 0.92 times more return on investment than Wuxi Dk. However, Shanghai Broadband Technology is 1.09 times less risky than Wuxi Dk. It trades about 0.02 of its potential returns per unit of risk. Wuxi Dk Electronic is currently generating about -0.04 per unit of risk. If you would invest  316.00  in Shanghai Broadband Technology on October 25, 2024 and sell it today you would earn a total of  6.00  from holding Shanghai Broadband Technology or generate 1.9% return on investment over 90 days.

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

Shanghai Broadband Technology  vs.  Wuxi Dk Electronic

Shanghai Broadband

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Broadband Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Broadband is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wuxi Dk Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuxi Dk Electronic 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.

Pair Trading with Shanghai Broadband and Wuxi Dk

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

The idea behind Shanghai Broadband Technology and Wuxi Dk Electronic 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.