Correlation Between Zhangjiagang Freetrade and Shenzhen SDG

Can any of the company-specific risk be diversified away by investing in both Zhangjiagang Freetrade 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 Zhangjiagang Freetrade and Shenzhen SDG 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 SDG Service, you can compare the effects of market volatilities on Zhangjiagang Freetrade 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 Zhangjiagang Freetrade with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Shenzhen SDG.

Diversification Opportunities for Zhangjiagang Freetrade and Shenzhen SDG

0.31

Correlation Coefficient

Zhangjiagang Freetrade  Shenzhen SDG

Weak diversification

The 3 months correlation between Zhangjiagang and Shenzhen is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science 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 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 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 Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Shenzhen SDG

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to generate 0.43 times more return on investment than Shenzhen SDG. However, Zhangjiagang Freetrade Science is 2.35 times less risky than Shenzhen SDG. It trades about -0.08 of its potential returns per unit of risk. Shenzhen SDG Service is currently generating about -0.04 per unit of risk. If you would invest  373.00  in Zhangjiagang Freetrade Science on December 28, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Zhangjiagang Freetrade Science  vs.  Shenzhen SDG Service

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 SDG Service

Risk-Adjusted Performance

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 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 SDG

The main advantage of trading using opposite Zhangjiagang Freetrade and Shenzhen SDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.