Correlation Between Zhejiang Publishing and Shenyu Communication

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

By analyzing existing cross correlation between Zhejiang Publishing Media and Shenyu Communication Technology, you can compare the effects of market volatilities on Zhejiang Publishing and Shenyu Communication 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 Zhejiang Publishing with a short position of Shenyu Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Publishing and Shenyu Communication.

Diversification Opportunities for Zhejiang Publishing and Shenyu Communication

0.22

Correlation Coefficient

Zhejiang Publishing  Shenyu Communication

Modest diversification

The 3 months correlation between Zhejiang and Shenyu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Publishing Media and Shenyu Communication Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyu Communication and Zhejiang Publishing 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 Zhejiang Publishing Media are associated (or correlated) with Shenyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyu Communication has no effect on the direction of Zhejiang Publishing i.e., Zhejiang Publishing and Shenyu Communication go up and down completely randomly.

Pair Corralation between Zhejiang Publishing and Shenyu Communication

Assuming the 90 days trading horizon Zhejiang Publishing Media is expected to under-perform the Shenyu Communication. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Publishing Media is 2.69 times less risky than Shenyu Communication. The stock trades about -0.09 of its potential returns per unit of risk. The Shenyu Communication Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,557  in Shenyu Communication Technology on October 27, 2024 and sell it today you would earn a total of  286.00  from holding Shenyu Communication Technology or generate 5.15% return on investment over 90 days.

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

Zhejiang Publishing Media  vs.  Shenyu Communication Technolog

Zhejiang Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenyu Communication

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyu Communication Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyu Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Publishing and Shenyu Communication

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

The idea behind Zhejiang Publishing Media and Shenyu Communication 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.