Correlation Between Shenzhen Investment and United Parks

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

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

Diversification Opportunities for Shenzhen Investment and United Parks

0.31

Correlation Coefficient

Shenzhen Investment  United Parks

Weak diversification

The 3 months correlation between Shenzhen and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Investment Holdings and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts and Shenzhen Investment 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 Investment Holdings are associated (or correlated) with United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Shenzhen Investment i.e., Shenzhen Investment and United Parks go up and down completely randomly.

Pair Corralation between Shenzhen Investment and United Parks

Assuming the 90 days horizon Shenzhen Investment Holdings is expected to generate 0.31 times more return on investment than United Parks. However, Shenzhen Investment Holdings is 3.27 times less risky than United Parks. It trades about 0.13 of its potential returns per unit of risk. United Parks Resorts is currently generating about -0.01 per unit of risk. If you would invest  21.00  in Shenzhen Investment Holdings on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Shenzhen Investment Holdings or generate 4.76% return on investment over 90 days.

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

Shenzhen Investment Holdings  vs.  United Parks Resorts

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.

United Parks Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parks Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, United Parks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Shenzhen Investment and United Parks

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

The idea behind Shenzhen Investment Holdings and United Parks Resorts 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.