Correlation Between Shenzhen Agricultural and Piotech

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

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

Diversification Opportunities for Shenzhen Agricultural and Piotech

0.85

Correlation Coefficient

Shenzhen Agricultural  Piotech

Very poor diversification

The 3 months correlation between Shenzhen and Piotech is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Agricultural Products and Piotech Inc A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piotech Inc A and Shenzhen Agricultural 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 Agricultural Products are associated (or correlated) with Piotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piotech Inc A has no effect on the direction of Shenzhen Agricultural i.e., Shenzhen Agricultural and Piotech go up and down completely randomly.

Pair Corralation between Shenzhen Agricultural and Piotech

Assuming the 90 days trading horizon Shenzhen Agricultural is expected to generate 1.31 times less return on investment than Piotech. But when comparing it to its historical volatility, Shenzhen Agricultural Products is 2.35 times less risky than Piotech. It trades about 0.27 of its potential returns per unit of risk. Piotech Inc A is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,383  in Piotech Inc A on September 15, 2024 and sell it today you would earn a total of  5,767  from holding Piotech Inc A or generate 50.66% return on investment over 90 days.

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

Shenzhen Agricultural Products  vs.  Piotech Inc A

Shenzhen Agricultural

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Agricultural Products are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Piotech Inc A

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Shenzhen Agricultural and Piotech

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

The idea behind Shenzhen Agricultural Products and Piotech Inc A 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.