Correlation Between Shanghai Yaoji and Shenzhen Topway

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

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

Diversification Opportunities for Shanghai Yaoji and Shenzhen Topway

0.92

Correlation Coefficient

Shanghai Yaoji  Shenzhen Topway

Almost no diversification

The 3 months correlation between Shanghai and Shenzhen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Yaoji Playing and Shenzhen Topway Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Topway Video and Shanghai Yaoji 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 Shanghai Yaoji Playing are associated (or correlated) with Shenzhen Topway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Topway Video has no effect on the direction of Shanghai Yaoji i.e., Shanghai Yaoji and Shenzhen Topway go up and down completely randomly.

Pair Corralation between Shanghai Yaoji and Shenzhen Topway

Assuming the 90 days trading horizon Shanghai Yaoji Playing is expected to under-perform the Shenzhen Topway. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Yaoji Playing is 1.02 times less risky than Shenzhen Topway. The stock trades about -0.19 of its potential returns per unit of risk. The Shenzhen Topway Video is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Shenzhen Topway Video on September 29, 2024 and sell it today you would lose (143.00) from holding Shenzhen Topway Video or give up 14.59% of portfolio value over 90 days.

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

Shanghai Yaoji Playing  vs.  Shenzhen Topway Video

Shanghai Yaoji Playing

Risk-Adjusted Performance

3 of 100

Insignificant

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

Shenzhen Topway Video

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shanghai Yaoji and Shenzhen Topway

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

The idea behind Shanghai Yaoji Playing and Shenzhen Topway Video 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.