Correlation Between Zhangjiagang Freetrade and Shenzhen Overseas

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

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

Diversification Opportunities for Zhangjiagang Freetrade and Shenzhen Overseas

0.77

Correlation Coefficient

Zhangjiagang Freetrade  Shenzhen Overseas

Poor diversification

The 3 months correlation between Zhangjiagang and Shenzhen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science 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 Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science 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 Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Shenzhen Overseas go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Shenzhen Overseas

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to generate 0.83 times more return on investment than Shenzhen Overseas. However, Zhangjiagang Freetrade Science is 1.21 times less risky than Shenzhen Overseas. It trades about -0.08 of its potential returns per unit of risk. Shenzhen Overseas Chinese is currently generating about -0.11 per unit of risk. If you would invest  373.00  in Zhangjiagang Freetrade Science on December 29, 2024 and sell it today you would lose (26.00) from holding Zhangjiagang Freetrade Science or give up 6.97% of portfolio value over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Shenzhen Overseas Chinese

Zhangjiagang Freetrade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhangjiagang Freetrade Science 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 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 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 Zhangjiagang Freetrade and Shenzhen Overseas

The main advantage of trading using opposite Zhangjiagang Freetrade and Shenzhen Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.