Correlation Between Shenzhen Zhongzhuang and Jinsanjiang Silicon

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

Diversification Opportunities for Shenzhen Zhongzhuang and Jinsanjiang Silicon

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Shenzhen and Jinsanjiang is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Jinsanjiang Silicon Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinsanjiang Silicon and Shenzhen Zhongzhuang 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 Zhongzhuang Construction are associated (or correlated) with Jinsanjiang Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinsanjiang Silicon has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Jinsanjiang Silicon go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Jinsanjiang Silicon

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to under-perform the Jinsanjiang Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Shenzhen Zhongzhuang Construction is 1.69 times less risky than Jinsanjiang Silicon. The stock trades about -0.41 of its potential returns per unit of risk. The Jinsanjiang Silicon Material is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,142  in Jinsanjiang Silicon Material on October 11, 2024 and sell it today you would lose (97.00) from holding Jinsanjiang Silicon Material or give up 8.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Shenzhen Zhongzhuang Construct  vs.  Jinsanjiang Silicon Material

 Performance 
       Timeline  
Shenzhen Zhongzhuang 

Risk-Adjusted Performance

25 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.
Jinsanjiang Silicon 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinsanjiang Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Zhongzhuang and Jinsanjiang Silicon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen Zhongzhuang and Jinsanjiang Silicon

The main advantage of trading using opposite Shenzhen Zhongzhuang and Jinsanjiang Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Zhongzhuang position performs unexpectedly, Jinsanjiang Silicon 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 Jinsanjiang Silicon will offset losses from the drop in Jinsanjiang Silicon's long position.
The idea behind Shenzhen Zhongzhuang Construction and Jinsanjiang Silicon Material 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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