Correlation Between Shenzhen SDG and Zhongzhu Medical

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

Diversification Opportunities for Shenzhen SDG and Zhongzhu Medical

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shenzhen and Zhongzhu is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Service and Zhongzhu Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongzhu Medical Holdings and Shenzhen SDG 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 SDG Service are associated (or correlated) with Zhongzhu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongzhu Medical Holdings has no effect on the direction of Shenzhen SDG i.e., Shenzhen SDG and Zhongzhu Medical go up and down completely randomly.

Pair Corralation between Shenzhen SDG and Zhongzhu Medical

Assuming the 90 days trading horizon Shenzhen SDG Service is expected to under-perform the Zhongzhu Medical. In addition to that, Shenzhen SDG is 1.68 times more volatile than Zhongzhu Medical Holdings. It trades about -0.1 of its total potential returns per unit of risk. Zhongzhu Medical Holdings is currently generating about -0.07 per unit of volatility. If you would invest  130.00  in Zhongzhu Medical Holdings on November 1, 2024 and sell it today you would lose (4.00) from holding Zhongzhu Medical Holdings or give up 3.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shenzhen SDG Service  vs.  Zhongzhu Medical Holdings

 Performance 
       Timeline  
Shenzhen SDG Service 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenzhen SDG Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Zhongzhu Medical Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zhongzhu Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhongzhu Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen SDG and Zhongzhu Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen SDG and Zhongzhu Medical

The main advantage of trading using opposite Shenzhen SDG and Zhongzhu Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen SDG position performs unexpectedly, Zhongzhu Medical 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 Zhongzhu Medical will offset losses from the drop in Zhongzhu Medical's long position.
The idea behind Shenzhen SDG Service and Zhongzhu Medical Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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