Correlation Between Ferrovial and Shenzhen Investment

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

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

Diversification Opportunities for Ferrovial and Shenzhen Investment

0.0

Correlation Coefficient

Ferrovial  Shenzhen Investment

Pay attention - limited upside

The 3 months correlation between Ferrovial and Shenzhen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ferrovial and Shenzhen Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment and Ferrovial 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 Ferrovial are associated (or correlated) with Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Ferrovial i.e., Ferrovial and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Ferrovial and Shenzhen Investment

Assuming the 90 days horizon Ferrovial is expected to generate 1.53 times less return on investment than Shenzhen Investment. But when comparing it to its historical volatility, Ferrovial is 1.97 times less risky than Shenzhen Investment. It trades about 0.1 of its potential returns per unit of risk. Shenzhen Investment Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.96  in Shenzhen Investment Holdings on October 8, 2024 and sell it today you would earn a total of  16.04  from holding Shenzhen Investment Holdings or generate 269.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.21%
Values	Daily Returns

Ferrovial  vs.  Shenzhen Investment Holdings

Ferrovial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrovial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ferrovial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shenzhen Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Investment Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Shenzhen Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ferrovial and Shenzhen Investment

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

The idea behind Ferrovial and Shenzhen Investment Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.