Correlation Between Shantou Wanshun and Dongxing Sec

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

By analyzing existing cross correlation between Shantou Wanshun Package and Dongxing Sec Co, you can compare the effects of market volatilities on Shantou Wanshun and Dongxing Sec 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 Shantou Wanshun with a short position of Dongxing Sec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Dongxing Sec.

Diversification Opportunities for Shantou Wanshun and Dongxing Sec

0.88

Correlation Coefficient

Shantou Wanshun  Dongxing Sec

Very poor diversification

The 3 months correlation between Shantou and Dongxing is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Dongxing Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongxing Sec and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Dongxing Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongxing Sec has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Dongxing Sec go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Dongxing Sec

Assuming the 90 days trading horizon Shantou Wanshun is expected to generate 1.16 times less return on investment than Dongxing Sec. In addition to that, Shantou Wanshun is 1.14 times more volatile than Dongxing Sec Co. It trades about 0.12 of its total potential returns per unit of risk. Dongxing Sec Co is currently generating about 0.16 per unit of volatility. If you would invest  818.00  in Dongxing Sec Co on September 19, 2024 and sell it today you would earn a total of  316.00  from holding Dongxing Sec Co or generate 38.63% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Dongxing Sec Co

Shantou Wanshun Package

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shantou Wanshun Package are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantou Wanshun sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongxing Sec

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongxing Sec sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shantou Wanshun and Dongxing Sec

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

The idea behind Shantou Wanshun Package and Dongxing Sec Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.