Correlation Between Zhejiang Daily and Shenzhen SDG

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

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

Diversification Opportunities for Zhejiang Daily and Shenzhen SDG

0.58

Correlation Coefficient

Zhejiang Daily  Shenzhen SDG

Very weak diversification

The 3 months correlation between Zhejiang and Shenzhen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Daily Media 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 Zhejiang Daily 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 Zhejiang Daily Media 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 Zhejiang Daily i.e., Zhejiang Daily and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Zhejiang Daily and Shenzhen SDG

Assuming the 90 days trading horizon Zhejiang Daily is expected to generate 4.18 times less return on investment than Shenzhen SDG. But when comparing it to its historical volatility, Zhejiang Daily Media is 1.48 times less risky than Shenzhen SDG. It trades about 0.02 of its potential returns per unit of risk. Shenzhen SDG Service is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,683  in Shenzhen SDG Service on October 13, 2024 and sell it today you would earn a total of  1,715  from holding Shenzhen SDG Service or generate 63.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Zhejiang Daily Media  vs.  Shenzhen SDG Service

Zhejiang Daily Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Daily Media 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 SDG Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen SDG Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhejiang Daily and Shenzhen SDG

The main advantage of trading using opposite Zhejiang Daily and Shenzhen SDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Daily 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 Zhejiang Daily Media 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.