Correlation Between Shenzhen MYS and Xiamen Jihong

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Can any of the company-specific risk be diversified away by investing in both Shenzhen MYS and Xiamen Jihong 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 MYS and Xiamen Jihong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shenzhen MYS Environmental and Xiamen Jihong Package, you can compare the effects of market volatilities on Shenzhen MYS and Xiamen Jihong 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 MYS with a short position of Xiamen Jihong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen MYS and Xiamen Jihong.

Diversification Opportunities for Shenzhen MYS and Xiamen Jihong

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Shenzhen and Xiamen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MYS Environmental and Xiamen Jihong Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Jihong Package and Shenzhen MYS 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 MYS Environmental are associated (or correlated) with Xiamen Jihong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Jihong Package has no effect on the direction of Shenzhen MYS i.e., Shenzhen MYS and Xiamen Jihong go up and down completely randomly.

Pair Corralation between Shenzhen MYS and Xiamen Jihong

Assuming the 90 days trading horizon Shenzhen MYS Environmental is expected to generate 1.04 times more return on investment than Xiamen Jihong. However, Shenzhen MYS is 1.04 times more volatile than Xiamen Jihong Package. It trades about 0.17 of its potential returns per unit of risk. Xiamen Jihong Package is currently generating about 0.07 per unit of risk. If you would invest  207.00  in Shenzhen MYS Environmental on September 5, 2024 and sell it today you would earn a total of  166.00  from holding Shenzhen MYS Environmental or generate 80.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Shenzhen MYS Environmental  vs.  Xiamen Jihong Package

 Performance 
       Timeline  
Shenzhen MYS Environ 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS sustained solid returns over the last few months and may actually be approaching a breakup point.
Xiamen Jihong Package 

Risk-Adjusted Performance

17 of 100

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

Shenzhen MYS and Xiamen Jihong Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen MYS and Xiamen Jihong

The main advantage of trading using opposite Shenzhen MYS and Xiamen Jihong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen MYS position performs unexpectedly, Xiamen Jihong 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 Xiamen Jihong will offset losses from the drop in Xiamen Jihong's long position.
The idea behind Shenzhen MYS Environmental and Xiamen Jihong Package 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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