Correlation Between Shenzhen Zhongzhuang and Wuhan Yangtze
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By analyzing existing cross correlation between Shenzhen Zhongzhuang Construction and Wuhan Yangtze Communication, you can compare the effects of market volatilities on Shenzhen Zhongzhuang and Wuhan Yangtze 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 Wuhan Yangtze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Zhongzhuang and Wuhan Yangtze.
Diversification Opportunities for Shenzhen Zhongzhuang and Wuhan Yangtze
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shenzhen and Wuhan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Wuhan Yangtze Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Yangtze Commun 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 Wuhan Yangtze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Yangtze Commun has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Wuhan Yangtze go up and down completely randomly.
Pair Corralation between Shenzhen Zhongzhuang and Wuhan Yangtze
Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to generate 0.86 times more return on investment than Wuhan Yangtze. However, Shenzhen Zhongzhuang Construction is 1.16 times less risky than Wuhan Yangtze. It trades about 0.3 of its potential returns per unit of risk. Wuhan Yangtze Communication is currently generating about 0.07 per unit of risk. If you would invest 98.00 in Shenzhen Zhongzhuang Construction on October 30, 2024 and sell it today you would earn a total of 282.00 from holding Shenzhen Zhongzhuang Construction or generate 287.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shenzhen Zhongzhuang Construct vs. Wuhan Yangtze Communication
Performance |
| Timeline |
| Shenzhen Zhongzhuang |
| Wuhan Yangtze Commun |
Shenzhen Zhongzhuang and Wuhan Yangtze Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shenzhen Zhongzhuang and Wuhan Yangtze
The main advantage of trading using opposite Shenzhen Zhongzhuang and Wuhan Yangtze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Zhongzhuang position performs unexpectedly, Wuhan Yangtze 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 Wuhan Yangtze will offset losses from the drop in Wuhan Yangtze's long position.The idea behind Shenzhen Zhongzhuang Construction and Wuhan Yangtze Communication 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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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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