Correlation Between Shenzhen Mindray and Zoomlion Heavy

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

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

Diversification Opportunities for Shenzhen Mindray and Zoomlion Heavy

0.81

Correlation Coefficient

Shenzhen Mindray  Zoomlion Heavy

Very poor diversification

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

Pair Corralation between Shenzhen Mindray and Zoomlion Heavy

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to generate 1.39 times more return on investment than Zoomlion Heavy. However, Shenzhen Mindray is 1.39 times more volatile than Zoomlion Heavy Industry. It trades about 0.08 of its potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about 0.1 per unit of risk. If you would invest  22,100  in Shenzhen Mindray Bio Medical on September 23, 2024 and sell it today you would earn a total of  2,926  from holding Shenzhen Mindray Bio Medical or generate 13.24% return on investment over 90 days.

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

Shenzhen Mindray Bio Medical  vs.  Zoomlion Heavy Industry

Shenzhen Mindray Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Mindray Bio Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Mindray sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoomlion Heavy Industry

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zoomlion Heavy Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoomlion Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Mindray and Zoomlion Heavy

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

The idea behind Shenzhen Mindray Bio Medical and Zoomlion Heavy Industry 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.