Correlation Between Industrial and Shenwan Hongyuan

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

By analyzing existing cross correlation between Industrial and Commercial and Shenwan Hongyuan Group, you can compare the effects of market volatilities on Industrial and Shenwan Hongyuan 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 with a short position of Shenwan Hongyuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Shenwan Hongyuan.

Diversification Opportunities for Industrial and Shenwan Hongyuan

-0.12

Correlation Coefficient

Industrial  Shenwan Hongyuan

Good diversification

The 3 months correlation between Industrial and Shenwan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Shenwan Hongyuan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenwan Hongyuan and Industrial 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 and Commercial are associated (or correlated) with Shenwan Hongyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenwan Hongyuan has no effect on the direction of Industrial i.e., Industrial and Shenwan Hongyuan go up and down completely randomly.

Pair Corralation between Industrial and Shenwan Hongyuan

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.58 times more return on investment than Shenwan Hongyuan. However, Industrial and Commercial is 1.73 times less risky than Shenwan Hongyuan. It trades about 0.18 of its potential returns per unit of risk. Shenwan Hongyuan Group is currently generating about -0.14 per unit of risk. If you would invest  615.00  in Industrial and Commercial on October 6, 2024 and sell it today you would earn a total of  56.00  from holding Industrial and Commercial or generate 9.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Industrial and Commercial  vs.  Shenwan Hongyuan Group

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shenwan Hongyuan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenwan Hongyuan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Shenwan Hongyuan

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

The idea behind Industrial and Commercial and Shenwan Hongyuan Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.