Correlation Between Shanghai Sanyou and ZJBC Information

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

By analyzing existing cross correlation between Shanghai Sanyou Medical and ZJBC Information Technology, you can compare the effects of market volatilities on Shanghai Sanyou and ZJBC Information 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 Sanyou with a short position of ZJBC Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Sanyou and ZJBC Information.

Diversification Opportunities for Shanghai Sanyou and ZJBC Information

0.3

Correlation Coefficient

Shanghai Sanyou  ZJBC Information

Weak diversification

The 3 months correlation between Shanghai and ZJBC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and ZJBC Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZJBC Information Tec and Shanghai Sanyou 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 Sanyou Medical are associated (or correlated) with ZJBC Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZJBC Information Tec has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and ZJBC Information go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and ZJBC Information

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the ZJBC Information. In addition to that, Shanghai Sanyou is 1.02 times more volatile than ZJBC Information Technology. It trades about -0.05 of its total potential returns per unit of risk. ZJBC Information Technology is currently generating about -0.02 per unit of volatility. If you would invest  264.00  in ZJBC Information Technology on December 24, 2024 and sell it today you would lose (13.00) from holding ZJBC Information Technology or give up 4.92% of portfolio value over 90 days.

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

Shanghai Sanyou Medical  vs.  ZJBC Information Technology

Shanghai Sanyou Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Sanyou Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ZJBC Information Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZJBC Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ZJBC Information 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 Sanyou and ZJBC Information

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

The idea behind Shanghai Sanyou Medical and ZJBC Information Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.