Correlation Between Shenzhen Fortune and Industrial

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

Diversification Opportunities for Shenzhen Fortune and Industrial

0.68

Correlation Coefficient

Shenzhen Fortune  Industrial

Poor diversification

The 3 months correlation between Shenzhen and Industrial is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Industrial go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Industrial

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to generate 3.46 times more return on investment than Industrial. However, Shenzhen Fortune is 3.46 times more volatile than Industrial and Commercial. It trades about 0.18 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.42 per unit of risk. If you would invest  16,145  in Shenzhen Fortune Trend on September 25, 2024 and sell it today you would earn a total of  2,495  from holding Shenzhen Fortune Trend or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Shenzhen Fortune Trend  vs.  Industrial and Commercial

Shenzhen Fortune Trend

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Fortune Trend are ranked lower than 14 (%) 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.

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Industrial

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

The idea behind Shenzhen Fortune Trend and Industrial and Commercial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..