Correlation Between Shenzhen Transsion and Limin Chemical

Can any of the company-specific risk be diversified away by investing in both Shenzhen Transsion and Limin Chemical 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 Shenzhen Transsion and Limin Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Transsion Holdings and Limin Chemical Co, you can compare the effects of market volatilities on Shenzhen Transsion and Limin Chemical 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 Shenzhen Transsion with a short position of Limin Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Transsion and Limin Chemical.

Diversification Opportunities for Shenzhen Transsion and Limin Chemical

-0.28

Correlation Coefficient

Shenzhen Transsion  Limin Chemical

Very good diversification

The 3 months correlation between Shenzhen and Limin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Transsion Holdings and Limin Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limin Chemical and Shenzhen Transsion 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 Shenzhen Transsion Holdings are associated (or correlated) with Limin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limin Chemical has no effect on the direction of Shenzhen Transsion i.e., Shenzhen Transsion and Limin Chemical go up and down completely randomly.

Pair Corralation between Shenzhen Transsion and Limin Chemical

Assuming the 90 days trading horizon Shenzhen Transsion Holdings is expected to under-perform the Limin Chemical. In addition to that, Shenzhen Transsion is 1.28 times more volatile than Limin Chemical Co. It trades about -0.1 of its total potential returns per unit of risk. Limin Chemical Co is currently generating about 0.01 per unit of volatility. If you would invest  802.00  in Limin Chemical Co on October 6, 2024 and sell it today you would lose (12.00) from holding Limin Chemical Co or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shenzhen Transsion Holdings  vs.  Limin Chemical Co

Shenzhen Transsion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Transsion Holdings 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.

Limin Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen Transsion and Limin Chemical

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

The idea behind Shenzhen Transsion Holdings and Limin Chemical 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.