Correlation Between Shenzhen Glory and Bright Dairy

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

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

Diversification Opportunities for Shenzhen Glory and Bright Dairy

0.86

Correlation Coefficient

Shenzhen Glory  Bright Dairy

Very poor diversification

The 3 months correlation between Shenzhen and Bright is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Bright Dairy Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Dairy Food and Shenzhen Glory 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 Glory Medical are associated (or correlated) with Bright Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Dairy Food has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Bright Dairy go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Bright Dairy

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to under-perform the Bright Dairy. In addition to that, Shenzhen Glory is 1.69 times more volatile than Bright Dairy Food. It trades about -0.03 of its total potential returns per unit of risk. Bright Dairy Food is currently generating about 0.08 per unit of volatility. If you would invest  853.00  in Bright Dairy Food on September 26, 2024 and sell it today you would earn a total of  30.00  from holding Bright Dairy Food or generate 3.52% return on investment over 90 days.

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

Shenzhen Glory Medical  vs.  Bright Dairy Food

Shenzhen Glory Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory sustained solid returns over the last few months and may actually be approaching a breakup point.

Bright Dairy Food

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Dairy Food are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bright Dairy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shenzhen Glory and Bright Dairy

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

The idea behind Shenzhen Glory Medical and Bright Dairy Food 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.