Correlation Between Chengdu B and Shenzhen Clou

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

By analyzing existing cross correlation between Chengdu B ray Media and Shenzhen Clou Electronics, you can compare the effects of market volatilities on Chengdu B and Shenzhen Clou 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 Chengdu B with a short position of Shenzhen Clou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu B and Shenzhen Clou.

Diversification Opportunities for Chengdu B and Shenzhen Clou

0.86

Correlation Coefficient

Chengdu B  Shenzhen Clou

Very poor diversification

The 3 months correlation between Chengdu and Shenzhen is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media and Shenzhen Clou Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Clou Electronics and Chengdu B 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 Chengdu B ray Media are associated (or correlated) with Shenzhen Clou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Clou Electronics has no effect on the direction of Chengdu B i.e., Chengdu B and Shenzhen Clou go up and down completely randomly.

Pair Corralation between Chengdu B and Shenzhen Clou

Assuming the 90 days trading horizon Chengdu B ray Media is expected to generate 1.14 times more return on investment than Shenzhen Clou. However, Chengdu B is 1.14 times more volatile than Shenzhen Clou Electronics. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.06 per unit of risk. If you would invest  535.00  in Chengdu B ray Media on October 11, 2024 and sell it today you would lose (88.00) from holding Chengdu B ray Media or give up 16.45% of portfolio value over 90 days.

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

Chengdu B ray Media  vs.  Shenzhen Clou Electronics

Chengdu B ray

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu B ray Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu B sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Clou Electronics

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Chengdu B and Shenzhen Clou

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

The idea behind Chengdu B ray Media and Shenzhen Clou Electronics 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.