Correlation Between China State and Shenzhen Centralcon

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

By analyzing existing cross correlation between China State Construction and Shenzhen Centralcon Investment, you can compare the effects of market volatilities on China State and Shenzhen Centralcon 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 State with a short position of Shenzhen Centralcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Shenzhen Centralcon.

Diversification Opportunities for China State and Shenzhen Centralcon

0.34

Correlation Coefficient

China State  Shenzhen Centralcon

Weak diversification

The 3 months correlation between China and Shenzhen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Shenzhen Centralcon Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Centralcon and China State 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 State Construction are associated (or correlated) with Shenzhen Centralcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Centralcon has no effect on the direction of China State i.e., China State and Shenzhen Centralcon go up and down completely randomly.

Pair Corralation between China State and Shenzhen Centralcon

Assuming the 90 days trading horizon China State Construction is expected to generate 0.59 times more return on investment than Shenzhen Centralcon. However, China State Construction is 1.69 times less risky than Shenzhen Centralcon. It trades about -0.12 of its potential returns per unit of risk. Shenzhen Centralcon Investment is currently generating about -0.07 per unit of risk. If you would invest  636.00  in China State Construction on October 13, 2024 and sell it today you would lose (86.00) from holding China State Construction or give up 13.52% of portfolio value over 90 days.

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

China State Construction  vs.  Shenzhen Centralcon Investment

China State Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China State Construction 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.

Shenzhen Centralcon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Centralcon Investment 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 China State and Shenzhen Centralcon

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

The idea behind China State Construction and Shenzhen Centralcon Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.