Correlation Between Shenzhen Investment and Jiangsu Expressway

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

By analyzing existing cross correlation between Shenzhen Investment Bay and Jiangsu Expressway Co, you can compare the effects of market volatilities on Shenzhen Investment and Jiangsu Expressway 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 Investment with a short position of Jiangsu Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Investment and Jiangsu Expressway.

Diversification Opportunities for Shenzhen Investment and Jiangsu Expressway

0.17

Correlation Coefficient

Shenzhen Investment  Jiangsu Expressway

Average diversification

The 3 months correlation between Shenzhen and Jiangsu is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Investment Bay and Jiangsu Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Expressway and Shenzhen Investment 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 Investment Bay are associated (or correlated) with Jiangsu Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Expressway has no effect on the direction of Shenzhen Investment i.e., Shenzhen Investment and Jiangsu Expressway go up and down completely randomly.

Pair Corralation between Shenzhen Investment and Jiangsu Expressway

Assuming the 90 days horizon Shenzhen Investment Bay is expected to generate 3.35 times more return on investment than Jiangsu Expressway. However, Shenzhen Investment is 3.35 times more volatile than Jiangsu Expressway Co. It trades about 0.09 of its potential returns per unit of risk. Jiangsu Expressway Co is currently generating about -0.01 per unit of risk. If you would invest  201.00  in Shenzhen Investment Bay on September 5, 2024 and sell it today you would earn a total of  61.00  from holding Shenzhen Investment Bay or generate 30.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shenzhen Investment Bay  vs.  Jiangsu Expressway Co

Shenzhen Investment Bay

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Investment Bay are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Shenzhen Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Expressway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangsu Expressway Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shenzhen Investment and Jiangsu Expressway

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

The idea behind Shenzhen Investment Bay and Jiangsu Expressway 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.