Correlation Between Shenzhen Bingchuan and Jizhong Energy

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

By analyzing existing cross correlation between Shenzhen Bingchuan Network and Jizhong Energy Resources, you can compare the effects of market volatilities on Shenzhen Bingchuan and Jizhong Energy 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 Bingchuan with a short position of Jizhong Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Bingchuan and Jizhong Energy.

Diversification Opportunities for Shenzhen Bingchuan and Jizhong Energy

0.83

Correlation Coefficient

Shenzhen Bingchuan  Jizhong Energy

Very poor diversification

The 3 months correlation between Shenzhen and Jizhong is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Bingchuan Network and Jizhong Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jizhong Energy Resources and Shenzhen Bingchuan 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 Bingchuan Network are associated (or correlated) with Jizhong Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jizhong Energy Resources has no effect on the direction of Shenzhen Bingchuan i.e., Shenzhen Bingchuan and Jizhong Energy go up and down completely randomly.

Pair Corralation between Shenzhen Bingchuan and Jizhong Energy

Assuming the 90 days trading horizon Shenzhen Bingchuan Network is expected to under-perform the Jizhong Energy. In addition to that, Shenzhen Bingchuan is 2.24 times more volatile than Jizhong Energy Resources. It trades about -0.18 of its total potential returns per unit of risk. Jizhong Energy Resources is currently generating about 0.09 per unit of volatility. If you would invest  614.00  in Jizhong Energy Resources on September 27, 2024 and sell it today you would earn a total of  22.00  from holding Jizhong Energy Resources or generate 3.58% return on investment over 90 days.

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

Shenzhen Bingchuan Network  vs.  Jizhong Energy Resources

Shenzhen Bingchuan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bingchuan Network are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Bingchuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Jizhong Energy Resources

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Shenzhen Bingchuan and Jizhong Energy

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

The idea behind Shenzhen Bingchuan Network and Jizhong Energy Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.