Correlation Between Blue Sail and Shenzhen United

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

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

Diversification Opportunities for Blue Sail and Shenzhen United

0.88

Correlation Coefficient

Blue Sail  Shenzhen United

Very poor diversification

The 3 months correlation between Blue and Shenzhen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and Shenzhen United Winners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen United Winners and Blue Sail 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 Blue Sail Medical are associated (or correlated) with Shenzhen United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen United Winners has no effect on the direction of Blue Sail i.e., Blue Sail and Shenzhen United go up and down completely randomly.

Pair Corralation between Blue Sail and Shenzhen United

Assuming the 90 days trading horizon Blue Sail is expected to generate 18.81 times less return on investment than Shenzhen United. But when comparing it to its historical volatility, Blue Sail Medical is 2.13 times less risky than Shenzhen United. It trades about 0.01 of its potential returns per unit of risk. Shenzhen United Winners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Shenzhen United Winners on September 29, 2024 and sell it today you would earn a total of  124.00  from holding Shenzhen United Winners or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Blue Sail Medical  vs.  Shenzhen United Winners

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Sail Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blue Sail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen United Winners

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen United Winners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen United sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Sail and Shenzhen United

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

The idea behind Blue Sail Medical and Shenzhen United Winners 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.