Correlation Between Shenzhen Fortune and Guangzhou KingTeller

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

By analyzing existing cross correlation between Shenzhen Fortune Trend and Guangzhou KingTeller Technology, you can compare the effects of market volatilities on Shenzhen Fortune and Guangzhou KingTeller 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 Fortune with a short position of Guangzhou KingTeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Fortune and Guangzhou KingTeller.

Diversification Opportunities for Shenzhen Fortune and Guangzhou KingTeller

0.88

Correlation Coefficient

Shenzhen Fortune  Guangzhou KingTeller

Very poor diversification

The 3 months correlation between Shenzhen and Guangzhou is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and Shenzhen Fortune 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 Fortune Trend are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Guangzhou KingTeller

Assuming the 90 days trading horizon Shenzhen Fortune is expected to generate 2.94 times less return on investment than Guangzhou KingTeller. But when comparing it to its historical volatility, Shenzhen Fortune Trend is 1.14 times less risky than Guangzhou KingTeller. It trades about 0.1 of its potential returns per unit of risk. Guangzhou KingTeller Technology is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Guangzhou KingTeller Technology on September 19, 2024 and sell it today you would earn a total of  118.00  from holding Guangzhou KingTeller Technology or generate 27.44% return on investment over 90 days.

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

Shenzhen Fortune Trend  vs.  Guangzhou KingTeller Technolog

Shenzhen Fortune Trend

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Fortune Trend are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Fortune sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou KingTeller

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KingTeller Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou KingTeller sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Guangzhou KingTeller

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

The idea behind Shenzhen Fortune Trend and Guangzhou KingTeller 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.