Correlation Between Chongqing Shunbo and Shenzhen Mindray

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

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

Diversification Opportunities for Chongqing Shunbo and Shenzhen Mindray

0.81

Correlation Coefficient

Chongqing Shunbo  Shenzhen Mindray

Very poor diversification

The 3 months correlation between Chongqing and Shenzhen is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio and Chongqing Shunbo 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 Chongqing Shunbo Aluminum are associated (or correlated) with Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of Chongqing Shunbo i.e., Chongqing Shunbo and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Shenzhen Mindray

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to generate 0.86 times more return on investment than Shenzhen Mindray. However, Chongqing Shunbo Aluminum is 1.16 times less risky than Shenzhen Mindray. It trades about 0.15 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about 0.05 per unit of risk. If you would invest  530.00  in Chongqing Shunbo Aluminum on September 3, 2024 and sell it today you would earn a total of  139.00  from holding Chongqing Shunbo Aluminum or generate 26.23% return on investment over 90 days.

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

Chongqing Shunbo Aluminum  vs.  Shenzhen Mindray Bio Medical

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Shunbo sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Mindray Bio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chongqing Shunbo and Shenzhen Mindray

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

The idea behind Chongqing Shunbo Aluminum and Shenzhen Mindray Bio Medical 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.