Correlation Between Shengfeng Development and Hub

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

By analyzing existing cross correlation between Shengfeng Development Limited and Hub Group, you can compare the effects of market volatilities on Shengfeng Development and Hub 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 Shengfeng Development with a short position of Hub. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengfeng Development and Hub.

Diversification Opportunities for Shengfeng Development and Hub

-0.57

Correlation Coefficient

Shengfeng Development  Hub

Excellent diversification

The 3 months correlation between Shengfeng and Hub is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shengfeng Development Limited and Hub Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Group and Shengfeng Development 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 Shengfeng Development Limited are associated (or correlated) with Hub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Group has no effect on the direction of Shengfeng Development i.e., Shengfeng Development and Hub go up and down completely randomly.

Pair Corralation between Shengfeng Development and Hub

Given the investment horizon of 90 days Shengfeng Development Limited is expected to under-perform the Hub. In addition to that, Shengfeng Development is 1.62 times more volatile than Hub Group. It trades about -0.02 of its total potential returns per unit of risk. Hub Group is currently generating about 0.11 per unit of volatility. If you would invest  4,580  in Hub Group on September 4, 2024 and sell it today you would earn a total of  615.00  from holding Hub Group or generate 13.43% return on investment over 90 days.

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

Shengfeng Development Limited  vs.  Hub Group

Shengfeng Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengfeng Development Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shengfeng Development is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hub Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Hub reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shengfeng Development and Hub

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

The idea behind Shengfeng Development Limited and Hub 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.