Correlation Between Shenzhen Fortune and Qijing Machinery

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

Diversification Opportunities for Shenzhen Fortune and Qijing Machinery

0.89

Correlation Coefficient

Shenzhen Fortune  Qijing Machinery

Very poor diversification

The 3 months correlation between Shenzhen and Qijing is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Qijing Machinery go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Qijing Machinery

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to generate 2.37 times more return on investment than Qijing Machinery. However, Shenzhen Fortune is 2.37 times more volatile than Qijing Machinery. It trades about 0.2 of its potential returns per unit of risk. Qijing Machinery is currently generating about 0.19 per unit of risk. If you would invest  9,047  in Shenzhen Fortune Trend on September 5, 2024 and sell it today you would earn a total of  9,173  from holding Shenzhen Fortune Trend or generate 101.39% return on investment over 90 days.

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

Shenzhen Fortune Trend  vs.  Qijing Machinery

Shenzhen Fortune Trend

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Fortune Trend are ranked lower than 15 (%) 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.

Qijing Machinery

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Qijing Machinery

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

The idea behind Shenzhen Fortune Trend and Qijing Machinery 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.