Correlation Between Shanghai Zhangjiang and Inspur Software

Can any of the company-specific risk be diversified away by investing in both Shanghai Zhangjiang and Inspur Software 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 Shanghai Zhangjiang and Inspur Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Zhangjiang Hi Tech and Inspur Software Co, you can compare the effects of market volatilities on Shanghai Zhangjiang and Inspur Software 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 Shanghai Zhangjiang with a short position of Inspur Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Zhangjiang and Inspur Software.

Diversification Opportunities for Shanghai Zhangjiang and Inspur Software

0.94

Correlation Coefficient

Shanghai Zhangjiang  Inspur Software

Almost no diversification

The 3 months correlation between Shanghai and Inspur is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Zhangjiang Hi Tech and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software and Shanghai Zhangjiang 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 Shanghai Zhangjiang Hi Tech are associated (or correlated) with Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Shanghai Zhangjiang i.e., Shanghai Zhangjiang and Inspur Software go up and down completely randomly.

Pair Corralation between Shanghai Zhangjiang and Inspur Software

Assuming the 90 days trading horizon Shanghai Zhangjiang is expected to generate 3.22 times less return on investment than Inspur Software. In addition to that, Shanghai Zhangjiang is 1.29 times more volatile than Inspur Software Co. It trades about 0.01 of its total potential returns per unit of risk. Inspur Software Co is currently generating about 0.05 per unit of volatility. If you would invest  1,575  in Inspur Software Co on September 5, 2024 and sell it today you would earn a total of  39.00  from holding Inspur Software Co or generate 2.48% return on investment over 90 days.

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

Shanghai Zhangjiang Hi Tech  vs.  Inspur Software Co

Shanghai Zhangjiang

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Zhangjiang Hi Tech are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Zhangjiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Inspur Software

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Zhangjiang and Inspur Software

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

The idea behind Shanghai Zhangjiang Hi Tech and Inspur Software 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.