Correlation Between Shanghai Sanyou and Shenzhen Zhongzhuang

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

Diversification Opportunities for Shanghai Sanyou and Shenzhen Zhongzhuang

0.35

Correlation Coefficient

Shanghai Sanyou  Shenzhen Zhongzhuang

Weak diversification

The 3 months correlation between Shanghai and Shenzhen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Sanyou Medical and Shenzhen Zhongzhuang Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Zhongzhuang has no effect on the direction of Shanghai Sanyou i.e., Shanghai Sanyou and Shenzhen Zhongzhuang go up and down completely randomly.

Pair Corralation between Shanghai Sanyou and Shenzhen Zhongzhuang

Assuming the 90 days trading horizon Shanghai Sanyou Medical is expected to under-perform the Shenzhen Zhongzhuang. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Sanyou Medical is 1.12 times less risky than Shenzhen Zhongzhuang. The stock trades about -0.01 of its potential returns per unit of risk. The Shenzhen Zhongzhuang Construction is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Shenzhen Zhongzhuang Construction on October 10, 2024 and sell it today you would lose (102.00) from holding Shenzhen Zhongzhuang Construction or give up 22.22% 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.  Shenzhen Zhongzhuang Construct

Shanghai Sanyou Medical

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Shanghai Sanyou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Zhongzhuang

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Sanyou and Shenzhen Zhongzhuang

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

The idea behind Shanghai Sanyou Medical and Shenzhen Zhongzhuang Construction 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 Stocks Directory module to find actively traded stocks across global markets.