Correlation Between Shanghai Shuixing and GreenTech Environmental

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

Diversification Opportunities for Shanghai Shuixing and GreenTech Environmental

0.66

Correlation Coefficient

Shanghai Shuixing  GreenTech Environmental

Poor diversification

The 3 months correlation between Shanghai and GreenTech is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Shuixing Home and GreenTech Environmental Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTech Environmental 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 GreenTech Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTech Environmental has no effect on the direction of Shanghai Shuixing i.e., Shanghai Shuixing and GreenTech Environmental go up and down completely randomly.

Pair Corralation between Shanghai Shuixing and GreenTech Environmental

Assuming the 90 days trading horizon Shanghai Shuixing Home is expected to generate 1.94 times more return on investment than GreenTech Environmental. However, Shanghai Shuixing is 1.94 times more volatile than GreenTech Environmental Co. It trades about 0.16 of its potential returns per unit of risk. GreenTech Environmental Co is currently generating about -0.44 per unit of risk. If you would invest  1,583  in Shanghai Shuixing Home on October 7, 2024 and sell it today you would earn a total of  173.00  from holding Shanghai Shuixing Home or generate 10.93% return on investment over 90 days.

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

Shanghai Shuixing Home  vs.  GreenTech Environmental Co

Shanghai Shuixing Home

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Shuixing Home are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Shuixing sustained solid returns over the last few months and may actually be approaching a breakup point.

GreenTech Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenTech Environmental Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GreenTech Environmental 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 GreenTech Environmental

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

The idea behind Shanghai Shuixing Home and GreenTech Environmental Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.