Correlation Between China World and Shenzhen Clou
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By analyzing existing cross correlation between China World Trade and Shenzhen Clou Electronics, you can compare the effects of market volatilities on China World and Shenzhen Clou 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 China World with a short position of Shenzhen Clou. Check out your portfolio center. Please also check ongoing floating volatility patterns of China World and Shenzhen Clou.
Diversification Opportunities for China World and Shenzhen Clou
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Shenzhen is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding China World Trade and Shenzhen Clou Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Clou Electronics and China World 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 China World Trade are associated (or correlated) with Shenzhen Clou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Clou Electronics has no effect on the direction of China World i.e., China World and Shenzhen Clou go up and down completely randomly.
Pair Corralation between China World and Shenzhen Clou
Assuming the 90 days trading horizon China World Trade is expected to generate 0.7 times more return on investment than Shenzhen Clou. However, China World Trade is 1.42 times less risky than Shenzhen Clou. It trades about 0.22 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.09 per unit of risk. If you would invest 2,386 in China World Trade on November 7, 2024 and sell it today you would earn a total of 110.00 from holding China World Trade or generate 4.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China World Trade vs. Shenzhen Clou Electronics
Performance |
| Timeline |
| China World Trade |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Shenzhen Clou Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China World and Shenzhen Clou Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China World and Shenzhen Clou
The main advantage of trading using opposite China World and Shenzhen Clou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China World position performs unexpectedly, Shenzhen Clou 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 Shenzhen Clou will offset losses from the drop in Shenzhen Clou's long position.The idea behind China World Trade and Shenzhen Clou Electronics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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