Correlation Between Shanghai Ziyan and Shenzhen Coship

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Can any of the company-specific risk be diversified away by investing in both Shanghai Ziyan and Shenzhen Coship 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 Shanghai Ziyan and Shenzhen Coship into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Ziyan Foods and Shenzhen Coship Electronics, you can compare the effects of market volatilities on Shanghai Ziyan and Shenzhen Coship 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 Shanghai Ziyan with a short position of Shenzhen Coship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Ziyan and Shenzhen Coship.

Diversification Opportunities for Shanghai Ziyan and Shenzhen Coship

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shanghai and Shenzhen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Ziyan Foods and Shenzhen Coship Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Coship Elec and Shanghai Ziyan 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 Shanghai Ziyan Foods are associated (or correlated) with Shenzhen Coship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Coship Elec has no effect on the direction of Shanghai Ziyan i.e., Shanghai Ziyan and Shenzhen Coship go up and down completely randomly.

Pair Corralation between Shanghai Ziyan and Shenzhen Coship

Assuming the 90 days trading horizon Shanghai Ziyan Foods is expected to under-perform the Shenzhen Coship. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Ziyan Foods is 1.45 times less risky than Shenzhen Coship. The stock trades about -0.03 of its potential returns per unit of risk. The Shenzhen Coship Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Shenzhen Coship Electronics on October 9, 2024 and sell it today you would earn a total of  403.00  from holding Shenzhen Coship Electronics or generate 163.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.59%
ValuesDaily Returns

Shanghai Ziyan Foods  vs.  Shenzhen Coship Electronics

 Performance 
       Timeline  
Shanghai Ziyan Foods 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Ziyan Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Ziyan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Shenzhen Coship Elec 

Risk-Adjusted Performance

35 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Coship Electronics are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Coship sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Ziyan and Shenzhen Coship Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanghai Ziyan and Shenzhen Coship

The main advantage of trading using opposite Shanghai Ziyan and Shenzhen Coship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Ziyan position performs unexpectedly, Shenzhen Coship 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 Coship will offset losses from the drop in Shenzhen Coship's long position.
The idea behind Shanghai Ziyan Foods and Shenzhen Coship 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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