Correlation Between Zoy Home and Shenzhen Clou

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

Diversification Opportunities for Zoy Home and Shenzhen Clou

ZoyShenzhenDiversified AwayZoyShenzhenDiversified Away100%
0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Zoy and Shenzhen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zoy Home Furnishing 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 Zoy Home 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 Zoy Home Furnishing 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 Zoy Home i.e., Zoy Home and Shenzhen Clou go up and down completely randomly.

Pair Corralation between Zoy Home and Shenzhen Clou

Assuming the 90 days trading horizon Zoy Home Furnishing is expected to generate 1.25 times more return on investment than Shenzhen Clou. However, Zoy Home is 1.25 times more volatile than Shenzhen Clou Electronics. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.04 per unit of risk. If you would invest  1,425  in Zoy Home Furnishing on November 30, 2024 and sell it today you would lose (291.00) from holding Zoy Home Furnishing or give up 20.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Zoy Home Furnishing  vs.  Shenzhen Clou Electronics

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15603709 002121
       Timeline  
Zoy Home Furnishing 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Zoy Home Furnishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zoy Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9.51010.51111.51212.513
Shenzhen Clou Electronics 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Clou Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Clou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb44.24.44.64.855.25.45.6

Zoy Home and Shenzhen Clou Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.95-7.45-4.96-2.460.04162.55.07.59.99 0.0200.0250.0300.0350.040
JavaScript chart by amCharts 3.21.15603709 002121
       Returns  

Pair Trading with Zoy Home and Shenzhen Clou

The main advantage of trading using opposite Zoy Home and Shenzhen Clou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoy Home 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 Zoy Home Furnishing 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.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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