Correlation Between Gotion High and Shenzhen Silver

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

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

Diversification Opportunities for Gotion High and Shenzhen Silver

0.77

Correlation Coefficient

Gotion High  Shenzhen Silver

Poor diversification

The 3 months correlation between Gotion and Shenzhen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gotion High tech and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Gotion High 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 Gotion High tech are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Gotion High i.e., Gotion High and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Gotion High and Shenzhen Silver

Assuming the 90 days trading horizon Gotion High tech is expected to under-perform the Shenzhen Silver. In addition to that, Gotion High is 1.08 times more volatile than Shenzhen Silver Basis. It trades about -0.06 of its total potential returns per unit of risk. Shenzhen Silver Basis is currently generating about -0.02 per unit of volatility. If you would invest  1,109  in Shenzhen Silver Basis on September 23, 2024 and sell it today you would lose (18.00) from holding Shenzhen Silver Basis or give up 1.62% of portfolio value over 90 days.

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

Gotion High tech  vs.  Shenzhen Silver Basis

Gotion High tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gotion High tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gotion High sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Silver Basis

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Silver Basis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Silver sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gotion High and Shenzhen Silver

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

The idea behind Gotion High tech and Shenzhen Silver Basis 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.