Correlation Between China Marine and Shenzhen MYS

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

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

Diversification Opportunities for China Marine and Shenzhen MYS

-0.23

Correlation Coefficient

China Marine  Shenzhen MYS

Very good diversification

The 3 months correlation between China and Shenzhen is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Marine Information and Shenzhen MYS Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MYS Environ and China Marine 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 China Marine Information are associated (or correlated) with Shenzhen MYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MYS Environ has no effect on the direction of China Marine i.e., China Marine and Shenzhen MYS go up and down completely randomly.

Pair Corralation between China Marine and Shenzhen MYS

Assuming the 90 days trading horizon China Marine Information is expected to under-perform the Shenzhen MYS. In addition to that, China Marine is 1.14 times more volatile than Shenzhen MYS Environmental. It trades about -0.17 of its total potential returns per unit of risk. Shenzhen MYS Environmental is currently generating about -0.08 per unit of volatility. If you would invest  356.00  in Shenzhen MYS Environmental on October 22, 2024 and sell it today you would lose (18.00) from holding Shenzhen MYS Environmental or give up 5.06% of portfolio value over 90 days.

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

China Marine Information  vs.  Shenzhen MYS Environmental

China Marine Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen MYS Environ

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Marine and Shenzhen MYS

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

The idea behind China Marine Information and Shenzhen MYS Environmental 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.