Correlation Between Industrial Bank and Shenzhen Sunlord

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

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

Diversification Opportunities for Industrial Bank and Shenzhen Sunlord

0.59

Correlation Coefficient

Industrial Bank  Shenzhen Sunlord

Very weak diversification

The 3 months correlation between Industrial and Shenzhen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank Co and Shenzhen Sunlord Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunlord Ele and Industrial Bank 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 Industrial Bank Co are associated (or correlated) with Shenzhen Sunlord. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunlord Ele has no effect on the direction of Industrial Bank i.e., Industrial Bank and Shenzhen Sunlord go up and down completely randomly.

Pair Corralation between Industrial Bank and Shenzhen Sunlord

Assuming the 90 days trading horizon Industrial Bank is expected to generate 2.3 times less return on investment than Shenzhen Sunlord. But when comparing it to its historical volatility, Industrial Bank Co is 1.43 times less risky than Shenzhen Sunlord. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Sunlord Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,729  in Shenzhen Sunlord Electronics on September 19, 2024 and sell it today you would earn a total of  396.00  from holding Shenzhen Sunlord Electronics or generate 14.51% return on investment over 90 days.

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

Industrial Bank Co  vs.  Shenzhen Sunlord Electronics

Industrial Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Sunlord Ele

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Sunlord Electronics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Sunlord sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial Bank and Shenzhen Sunlord

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

The idea behind Industrial Bank Co and Shenzhen Sunlord 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.