Correlation Between Sino Land and Shenzhen Investment

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

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

Diversification Opportunities for Sino Land and Shenzhen Investment

-0.1

Correlation Coefficient

Sino Land  Shenzhen Investment

Good diversification

The 3 months correlation between Sino and Shenzhen is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sino Land and Shenzhen Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment and Sino Land 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 Sino Land 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 Sino Land i.e., Sino Land and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Sino Land and Shenzhen Investment

Assuming the 90 days horizon Sino Land is expected to generate 0.8 times more return on investment than Shenzhen Investment. However, Sino Land is 1.25 times less risky than Shenzhen Investment. It trades about 0.07 of its potential returns per unit of risk. Shenzhen Investment Limited is currently generating about 0.01 per unit of risk. If you would invest  30.00  in Sino Land on October 26, 2024 and sell it today you would earn a total of  59.00  from holding Sino Land or generate 196.67% return on investment over 90 days.

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

Sino Land  vs.  Shenzhen Investment Limited

Sino Land

Risk-Adjusted Performance

0 of 100

Weak

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

Shenzhen Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sino Land and Shenzhen Investment

The main advantage of trading using opposite Sino Land and Shenzhen Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Land 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 Sino Land and Shenzhen Investment Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.