Correlation Between Shenzhen Urban and Zoy Home

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Can any of the company-specific risk be diversified away by investing in both Shenzhen Urban and Zoy Home 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 Urban and Zoy Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shenzhen Urban Transport and Zoy Home Furnishing, you can compare the effects of market volatilities on Shenzhen Urban and Zoy Home 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 Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Urban and Zoy Home.

Diversification Opportunities for Shenzhen Urban and Zoy Home

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Shenzhen and Zoy is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Urban Transport and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing 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 Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Shenzhen Urban i.e., Shenzhen Urban and Zoy Home go up and down completely randomly.

Pair Corralation between Shenzhen Urban and Zoy Home

Assuming the 90 days trading horizon Shenzhen Urban Transport is expected to under-perform the Zoy Home. In addition to that, Shenzhen Urban is 1.06 times more volatile than Zoy Home Furnishing. It trades about -0.19 of its total potential returns per unit of risk. Zoy Home Furnishing is currently generating about 0.08 per unit of volatility. If you would invest  1,087  in Zoy Home Furnishing on November 1, 2024 and sell it today you would earn a total of  47.00  from holding Zoy Home Furnishing or generate 4.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Shenzhen Urban Transport  vs.  Zoy Home Furnishing

 Performance 
       Timeline  
Shenzhen Urban Transport 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shenzhen Urban Transport 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.
Zoy Home Furnishing 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Urban and Zoy Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shenzhen Urban and Zoy Home

The main advantage of trading using opposite Shenzhen Urban and Zoy Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Urban position performs unexpectedly, Zoy Home 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 Zoy Home will offset losses from the drop in Zoy Home's long position.
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The idea behind Shenzhen Urban Transport and Zoy Home Furnishing 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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