Correlation Between Shenzhen Fortune and Haima Automobile

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

By analyzing existing cross correlation between Shenzhen Fortune Trend and Haima Automobile Group, you can compare the effects of market volatilities on Shenzhen Fortune and Haima Automobile 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 Fortune with a short position of Haima Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Fortune and Haima Automobile.

Diversification Opportunities for Shenzhen Fortune and Haima Automobile

0.79

Correlation Coefficient

Shenzhen Fortune  Haima Automobile

Poor diversification

The 3 months correlation between Shenzhen and Haima is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Haima Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haima Automobile and Shenzhen Fortune 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 Fortune Trend are associated (or correlated) with Haima Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haima Automobile has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Haima Automobile go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Haima Automobile

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to generate 1.32 times more return on investment than Haima Automobile. However, Shenzhen Fortune is 1.32 times more volatile than Haima Automobile Group. It trades about 0.07 of its potential returns per unit of risk. Haima Automobile Group is currently generating about -0.02 per unit of risk. If you would invest  18,036  in Shenzhen Fortune Trend on September 13, 2024 and sell it today you would earn a total of  898.00  from holding Shenzhen Fortune Trend or generate 4.98% return on investment over 90 days.

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

Shenzhen Fortune Trend  vs.  Haima Automobile Group

Shenzhen Fortune Trend

Risk-Adjusted Performance

17 of 100

Solid

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

Haima Automobile

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Haima Automobile Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haima Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Haima Automobile

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

The idea behind Shenzhen Fortune Trend and Haima Automobile Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.