Correlation Between CSSC Offshore and Shenzhen Overseas

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

By analyzing existing cross correlation between CSSC Offshore Marine and Shenzhen Overseas Chinese, you can compare the effects of market volatilities on CSSC Offshore and Shenzhen Overseas 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 CSSC Offshore with a short position of Shenzhen Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSSC Offshore and Shenzhen Overseas.

Diversification Opportunities for CSSC Offshore and Shenzhen Overseas

0.9

Correlation Coefficient

CSSC Offshore  Shenzhen Overseas

Almost no diversification

The 3 months correlation between CSSC and Shenzhen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CSSC Offshore Marine and Shenzhen Overseas Chinese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Overseas Chinese and CSSC Offshore 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 CSSC Offshore Marine are associated (or correlated) with Shenzhen Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Overseas Chinese has no effect on the direction of CSSC Offshore i.e., CSSC Offshore and Shenzhen Overseas go up and down completely randomly.

Pair Corralation between CSSC Offshore and Shenzhen Overseas

Assuming the 90 days trading horizon CSSC Offshore Marine is expected to under-perform the Shenzhen Overseas. But the stock apears to be less risky and, when comparing its historical volatility, CSSC Offshore Marine is 2.11 times less risky than Shenzhen Overseas. The stock trades about -0.09 of its potential returns per unit of risk. The Shenzhen Overseas Chinese is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Shenzhen Overseas Chinese on December 9, 2024 and sell it today you would lose (4.00) from holding Shenzhen Overseas Chinese or give up 1.61% of portfolio value over 90 days.

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

CSSC Offshore Marine  vs.  Shenzhen Overseas Chinese

CSSC Offshore Marine

Risk-Adjusted Performance

Very Weak

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

Shenzhen Overseas Chinese

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Overseas Chinese 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CSSC Offshore and Shenzhen Overseas

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

The idea behind CSSC Offshore Marine and Shenzhen Overseas Chinese 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.