Correlation Between Shenzhen Urban and Bank of Communications
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By analyzing existing cross correlation between Shenzhen Urban Transport and Bank of Communications, you can compare the effects of market volatilities on Shenzhen Urban and Bank of Communications 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 Urban with a short position of Bank of Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Urban and Bank of Communications.
Diversification Opportunities for Shenzhen Urban and Bank of Communications
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shenzhen and Bank is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Urban Transport and Bank of Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Communications and Shenzhen Urban 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 Urban Transport are associated (or correlated) with Bank of Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Communications has no effect on the direction of Shenzhen Urban i.e., Shenzhen Urban and Bank of Communications go up and down completely randomly.
Pair Corralation between Shenzhen Urban and Bank of Communications
Assuming the 90 days trading horizon Shenzhen Urban Transport is expected to generate 1.77 times more return on investment than Bank of Communications. However, Shenzhen Urban is 1.77 times more volatile than Bank of Communications. It trades about 0.1 of its potential returns per unit of risk. Bank of Communications is currently generating about -0.08 per unit of risk. If you would invest 4,006 in Shenzhen Urban Transport on November 7, 2024 and sell it today you would earn a total of 152.00 from holding Shenzhen Urban Transport or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shenzhen Urban Transport vs. Bank of Communications
Performance |
| Timeline |
| Shenzhen Urban Transport |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Bank of Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shenzhen Urban and Bank of Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shenzhen Urban and Bank of Communications
The main advantage of trading using opposite Shenzhen Urban and Bank of Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Urban position performs unexpectedly, Bank of Communications 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 Bank of Communications will offset losses from the drop in Bank of Communications' long position.The idea behind Shenzhen Urban Transport and Bank of Communications 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.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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