Correlation Between Shenzhen Fortune and State Grid

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

Diversification Opportunities for Shenzhen Fortune and State Grid

0.63

Correlation Coefficient

Shenzhen Fortune  State Grid

Poor diversification

The 3 months correlation between Shenzhen and State is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and State Grid go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and State Grid

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to generate 1.86 times more return on investment than State Grid. However, Shenzhen Fortune is 1.86 times more volatile than State Grid InformationCommunication. It trades about 0.04 of its potential returns per unit of risk. State Grid InformationCommunication is currently generating about 0.02 per unit of risk. If you would invest  11,004  in Shenzhen Fortune Trend on October 25, 2024 and sell it today you would earn a total of  5,134  from holding Shenzhen Fortune Trend or generate 46.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Shenzhen Fortune Trend  vs.  State Grid InformationCommunic

Shenzhen Fortune Trend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Fortune Trend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Fortune may actually be approaching a critical reversion point that can send shares even higher in February 2025.

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Grid InformationCommunication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, State Grid 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 Fortune and State Grid

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

The idea behind Shenzhen Fortune Trend and State Grid InformationCommunication 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.