Correlation Between Shenzhen Mindray and Zangge Holding

Can any of the company-specific risk be diversified away by investing in both Shenzhen Mindray and Zangge Holding 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 Zangge Holding 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 Zangge Holding Co, you can compare the effects of market volatilities on Shenzhen Mindray and Zangge Holding 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 Zangge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Mindray and Zangge Holding.

Diversification Opportunities for Shenzhen Mindray and Zangge Holding

0.7

Correlation Coefficient

Shenzhen Mindray  Zangge Holding

Poor diversification

The 3 months correlation between Shenzhen and Zangge is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Mindray Bio Medical and Zangge Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zangge Holding 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 Zangge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zangge Holding has no effect on the direction of Shenzhen Mindray i.e., Shenzhen Mindray and Zangge Holding go up and down completely randomly.

Pair Corralation between Shenzhen Mindray and Zangge Holding

Assuming the 90 days trading horizon Shenzhen Mindray Bio Medical is expected to generate 1.38 times more return on investment than Zangge Holding. However, Shenzhen Mindray is 1.38 times more volatile than Zangge Holding Co. It trades about 0.08 of its potential returns per unit of risk. Zangge Holding Co 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	Significant
Accuracy	100.0%
Values	Daily Returns

Shenzhen Mindray Bio Medical  vs.  Zangge Holding Co

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.

Zangge Holding

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Shenzhen Mindray and Zangge Holding

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

The idea behind Shenzhen Mindray Bio Medical and Zangge Holding 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.