Correlation Between Fujian Oriental and Shenzhen SDG

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

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

Diversification Opportunities for Fujian Oriental and Shenzhen SDG

0.67

Correlation Coefficient

Fujian Oriental  Shenzhen SDG

Poor diversification

The 3 months correlation between Fujian and Shenzhen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Oriental Silver and Shenzhen SDG Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Information and Fujian Oriental 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 Fujian Oriental Silver 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 Information has no effect on the direction of Fujian Oriental i.e., Fujian Oriental and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Fujian Oriental and Shenzhen SDG

Assuming the 90 days trading horizon Fujian Oriental is expected to generate 3.6 times less return on investment than Shenzhen SDG. In addition to that, Fujian Oriental is 1.57 times more volatile than Shenzhen SDG Information. It trades about 0.03 of its total potential returns per unit of risk. Shenzhen SDG Information is currently generating about 0.16 per unit of volatility. If you would invest  465.00  in Shenzhen SDG Information on September 29, 2024 and sell it today you would earn a total of  121.00  from holding Shenzhen SDG Information or generate 26.02% return on investment over 90 days.

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

Fujian Oriental Silver  vs.  Shenzhen SDG Information

Fujian Oriental Silver

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Oriental Silver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shenzhen SDG Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 12 (%) 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 Fujian Oriental and Shenzhen SDG

The main advantage of trading using opposite Fujian Oriental and Shenzhen SDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fujian Oriental 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 Fujian Oriental Silver and Shenzhen SDG Information 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.