Correlation Between Shenzhen Fortune and Hunan Mendale

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

Diversification Opportunities for Shenzhen Fortune and Hunan Mendale

-0.65

Correlation Coefficient

Shenzhen Fortune  Hunan Mendale

Excellent diversification

The 3 months correlation between Shenzhen and Hunan is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Hunan Mendale Hometextile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Mendale Hometextile 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 Hunan Mendale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Mendale Hometextile has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Hunan Mendale go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Hunan Mendale

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to under-perform the Hunan Mendale. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Fortune Trend is 1.54 times less risky than Hunan Mendale. The stock trades about -0.12 of its potential returns per unit of risk. The Hunan Mendale Hometextile is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Hunan Mendale Hometextile on December 30, 2024 and sell it today you would earn a total of  142.00  from holding Hunan Mendale Hometextile or generate 53.18% return on investment over 90 days.

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

Shenzhen Fortune Trend  vs.  Hunan Mendale Hometextile

Shenzhen Fortune Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Fortune Trend 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hunan Mendale Hometextile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Hunan Mendale

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

The idea behind Shenzhen Fortune Trend and Hunan Mendale Hometextile 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.