Correlation Between Guangzhou Haige and Shenzhen SDG

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

By analyzing existing cross correlation between Guangzhou Haige Communications and Shenzhen SDG Information, you can compare the effects of market volatilities on Guangzhou Haige and Shenzhen SDG 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 Guangzhou Haige with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Haige and Shenzhen SDG.

Diversification Opportunities for Guangzhou Haige and Shenzhen SDG

0.9

Correlation Coefficient

Guangzhou Haige  Shenzhen SDG

Almost no diversification

The 3 months correlation between Guangzhou and Shenzhen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Haige Communications and Shenzhen SDG Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Information and Guangzhou Haige 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 Guangzhou Haige Communications are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Information has no effect on the direction of Guangzhou Haige i.e., Guangzhou Haige and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Guangzhou Haige and Shenzhen SDG

Assuming the 90 days trading horizon Guangzhou Haige is expected to generate 1.24 times less return on investment than Shenzhen SDG. In addition to that, Guangzhou Haige is 1.32 times more volatile than Shenzhen SDG Information. It trades about 0.13 of its total potential returns per unit of risk. Shenzhen SDG Information is currently generating about 0.21 per unit of volatility. If you would invest  429.00  in Shenzhen SDG Information on September 26, 2024 and sell it today you would earn a total of  156.00  from holding Shenzhen SDG Information or generate 36.36% return on investment over 90 days.

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

Guangzhou Haige Communications  vs.  Shenzhen SDG Information

Guangzhou Haige Comm

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Haige Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Haige sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen SDG Information

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Guangzhou Haige and Shenzhen SDG

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

The idea behind Guangzhou Haige Communications and Shenzhen SDG Information 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 Anywhere module to track or share privately all of your investments from the convenience of any device.