Correlation Between Industrial and Shenzhen SDG

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

By analyzing existing cross correlation between Industrial and Commercial and Shenzhen SDG Information, you can compare the effects of market volatilities on Industrial and Shenzhen SDG 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 Industrial with a short position of Shenzhen SDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Shenzhen SDG.

Diversification Opportunities for Industrial and Shenzhen SDG

0.21

Correlation Coefficient

Industrial  Shenzhen SDG

Modest diversification

The 3 months correlation between Industrial and Shenzhen is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Shenzhen SDG Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen SDG Information and Industrial 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 Industrial and Commercial are associated (or correlated) with Shenzhen SDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen SDG Information has no effect on the direction of Industrial i.e., Industrial and Shenzhen SDG go up and down completely randomly.

Pair Corralation between Industrial and Shenzhen SDG

Assuming the 90 days trading horizon Industrial is expected to generate 9.04 times less return on investment than Shenzhen SDG. But when comparing it to its historical volatility, Industrial and Commercial is 1.68 times less risky than Shenzhen SDG. It trades about 0.05 of its potential returns per unit of risk. Shenzhen SDG Information is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  410.00  in Shenzhen SDG Information on September 2, 2024 and sell it today you would earn a total of  176.00  from holding Shenzhen SDG Information or generate 42.93% return on investment over 90 days.

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

Industrial and Commercial  vs.  Shenzhen SDG Information

Industrial and Commercial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen SDG Information

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Information are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen SDG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Shenzhen SDG

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

The idea behind Industrial and Commercial and Shenzhen SDG Information 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.