Correlation Between Shanghai Shuixing and Zoy Home

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

By analyzing existing cross correlation between Shanghai Shuixing Home and Zoy Home Furnishing, you can compare the effects of market volatilities on Shanghai Shuixing and Zoy Home 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 Shuixing with a short position of Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Shuixing and Zoy Home.

Diversification Opportunities for Shanghai Shuixing and Zoy Home

-0.11

Correlation Coefficient

Shanghai Shuixing  Zoy Home

Good diversification

The 3 months correlation between Shanghai and Zoy is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Shuixing Home and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing and Shanghai Shuixing 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 Shuixing Home are associated (or correlated) with Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Shanghai Shuixing i.e., Shanghai Shuixing and Zoy Home go up and down completely randomly.

Pair Corralation between Shanghai Shuixing and Zoy Home

Assuming the 90 days trading horizon Shanghai Shuixing Home is expected to generate 0.9 times more return on investment than Zoy Home. However, Shanghai Shuixing Home is 1.11 times less risky than Zoy Home. It trades about 0.01 of its potential returns per unit of risk. Zoy Home Furnishing is currently generating about 0.0 per unit of risk. If you would invest  1,592  in Shanghai Shuixing Home on December 5, 2024 and sell it today you would lose (20.00) from holding Shanghai Shuixing Home or give up 1.26% of portfolio value over 90 days.

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

Shanghai Shuixing Home  vs.  Zoy Home Furnishing

Shanghai Shuixing Home

Risk-Adjusted Performance

Weak

Over the last 90 days Shanghai Shuixing Home has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Shuixing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zoy Home Furnishing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoy Home Furnishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zoy Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Shuixing and Zoy Home

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

The idea behind Shanghai Shuixing Home and Zoy Home Furnishing 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 Transaction History module to view history of all your transactions and understand their impact on performance.