Correlation Between Shanghai Ziyan and Shanghai Junshi

Can any of the company-specific risk be diversified away by investing in both Shanghai Ziyan and Shanghai Junshi 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 Shanghai Junshi 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 Shanghai Junshi Biosciences, you can compare the effects of market volatilities on Shanghai Ziyan and Shanghai Junshi 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 Shanghai Junshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Ziyan and Shanghai Junshi.

Diversification Opportunities for Shanghai Ziyan and Shanghai Junshi

-0.04

Correlation Coefficient

Shanghai Ziyan  Shanghai Junshi

Good diversification

The 3 months correlation between Shanghai and Shanghai is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Ziyan Foods and Shanghai Junshi Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Junshi Bios 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 Shanghai Junshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Junshi Bios has no effect on the direction of Shanghai Ziyan i.e., Shanghai Ziyan and Shanghai Junshi go up and down completely randomly.

Pair Corralation between Shanghai Ziyan and Shanghai Junshi

Assuming the 90 days trading horizon Shanghai Ziyan Foods is expected to generate 0.88 times more return on investment than Shanghai Junshi. However, Shanghai Ziyan Foods is 1.14 times less risky than Shanghai Junshi. It trades about -0.01 of its potential returns per unit of risk. Shanghai Junshi Biosciences is currently generating about -0.06 per unit of risk. If you would invest  2,657  in Shanghai Ziyan Foods on October 4, 2024 and sell it today you would lose (648.00) from holding Shanghai Ziyan Foods or give up 24.39% of portfolio value over 90 days.

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

Shanghai Ziyan Foods  vs.  Shanghai Junshi Biosciences

Shanghai Ziyan Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Ziyan Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Ziyan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shanghai Junshi Bios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Junshi Biosciences 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 Shanghai Ziyan and Shanghai Junshi

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

The idea behind Shanghai Ziyan Foods and Shanghai Junshi Biosciences 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.