Correlation Between China Shenhua and Sharetronic Data

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

By analyzing existing cross correlation between China Shenhua Energy and Sharetronic Data Technology, you can compare the effects of market volatilities on China Shenhua and Sharetronic Data 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 Shenhua with a short position of Sharetronic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Shenhua and Sharetronic Data.

Diversification Opportunities for China Shenhua and Sharetronic Data

0.27

Correlation Coefficient

China Shenhua  Sharetronic Data

Modest diversification

The 3 months correlation between China and Sharetronic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding China Shenhua Energy and Sharetronic Data Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharetronic Data Tec and China Shenhua 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 Shenhua Energy are associated (or correlated) with Sharetronic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharetronic Data Tec has no effect on the direction of China Shenhua i.e., China Shenhua and Sharetronic Data go up and down completely randomly.

Pair Corralation between China Shenhua and Sharetronic Data

Assuming the 90 days trading horizon China Shenhua is expected to generate 25.45 times less return on investment than Sharetronic Data. But when comparing it to its historical volatility, China Shenhua Energy is 3.53 times less risky than Sharetronic Data. It trades about 0.02 of its potential returns per unit of risk. Sharetronic Data Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,002  in Sharetronic Data Technology on October 6, 2024 and sell it today you would earn a total of  1,157  from holding Sharetronic Data Technology or generate 12.85% return on investment over 90 days.

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

China Shenhua Energy  vs.  Sharetronic Data Technology

China Shenhua Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sharetronic Data Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sharetronic Data Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sharetronic Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Shenhua and Sharetronic Data

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

The idea behind China Shenhua Energy and Sharetronic Data Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.