Correlation Between Shenzhen Topway and Beijing Wandong

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

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

Diversification Opportunities for Shenzhen Topway and Beijing Wandong

0.93

Correlation Coefficient

Shenzhen Topway  Beijing Wandong

Almost no diversification

The 3 months correlation between Shenzhen and Beijing is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Topway Video and Beijing Wandong Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Wandong Medical and Shenzhen Topway 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 Topway Video are associated (or correlated) with Beijing Wandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Wandong Medical has no effect on the direction of Shenzhen Topway i.e., Shenzhen Topway and Beijing Wandong go up and down completely randomly.

Pair Corralation between Shenzhen Topway and Beijing Wandong

Assuming the 90 days trading horizon Shenzhen Topway Video is expected to generate 1.2 times more return on investment than Beijing Wandong. However, Shenzhen Topway is 1.2 times more volatile than Beijing Wandong Medical. It trades about 0.08 of its potential returns per unit of risk. Beijing Wandong Medical is currently generating about 0.09 per unit of risk. If you would invest  839.00  in Shenzhen Topway Video on September 15, 2024 and sell it today you would earn a total of  220.00  from holding Shenzhen Topway Video or generate 26.22% return on investment over 90 days.

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

Shenzhen Topway Video  vs.  Beijing Wandong Medical

Shenzhen Topway Video

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Wandong Medical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Wandong Medical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Wandong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Topway and Beijing Wandong

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

The idea behind Shenzhen Topway Video and Beijing Wandong Medical 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.