Correlation Between Shenzhen Silver and Shenzhen Kexin

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

By analyzing existing cross correlation between Shenzhen Silver Basis and Shenzhen Kexin Communication, you can compare the effects of market volatilities on Shenzhen Silver and Shenzhen Kexin 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 Silver with a short position of Shenzhen Kexin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Silver and Shenzhen Kexin.

Diversification Opportunities for Shenzhen Silver and Shenzhen Kexin

0.82

Correlation Coefficient

Shenzhen Silver  Shenzhen Kexin

Very poor diversification

The 3 months correlation between Shenzhen and Shenzhen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Silver Basis and Shenzhen Kexin Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kexin Commu and Shenzhen Silver 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 Silver Basis are associated (or correlated) with Shenzhen Kexin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kexin Commu has no effect on the direction of Shenzhen Silver i.e., Shenzhen Silver and Shenzhen Kexin go up and down completely randomly.

Pair Corralation between Shenzhen Silver and Shenzhen Kexin

Assuming the 90 days trading horizon Shenzhen Silver Basis is expected to under-perform the Shenzhen Kexin. In addition to that, Shenzhen Silver is 1.04 times more volatile than Shenzhen Kexin Communication. It trades about 0.0 of its total potential returns per unit of risk. Shenzhen Kexin Communication is currently generating about 0.01 per unit of volatility. If you would invest  1,313  in Shenzhen Kexin Communication on September 29, 2024 and sell it today you would lose (38.00) from holding Shenzhen Kexin Communication or give up 2.89% of portfolio value over 90 days.

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

Shenzhen Silver Basis  vs.  Shenzhen Kexin Communication

Shenzhen Silver Basis

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Kexin Commu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shenzhen Silver and Shenzhen Kexin

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

The idea behind Shenzhen Silver Basis and Shenzhen Kexin Communication 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.