Correlation Between Guangdong Skychem and Shenzhen MYS

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

Diversification Opportunities for Guangdong Skychem and Shenzhen MYS

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Guangdong and Shenzhen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Skychem Technology and Shenzhen MYS Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MYS Environ and Guangdong Skychem 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 Guangdong Skychem Technology are associated (or correlated) with Shenzhen MYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MYS Environ has no effect on the direction of Guangdong Skychem i.e., Guangdong Skychem and Shenzhen MYS go up and down completely randomly.

Pair Corralation between Guangdong Skychem and Shenzhen MYS

Assuming the 90 days trading horizon Guangdong Skychem Technology is expected to generate 1.63 times more return on investment than Shenzhen MYS. However, Guangdong Skychem is 1.63 times more volatile than Shenzhen MYS Environmental. It trades about 0.05 of its potential returns per unit of risk. Shenzhen MYS Environmental is currently generating about 0.03 per unit of risk. If you would invest  5,469  in Guangdong Skychem Technology on October 16, 2024 and sell it today you would earn a total of  2,691  from holding Guangdong Skychem Technology or generate 49.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Guangdong Skychem Technology  vs.  Shenzhen MYS Environmental

 Performance 
       Timeline  
Guangdong Skychem 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Skychem Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Skychem sustained solid returns over the last few months and may actually be approaching a breakup point.
Shenzhen MYS Environ 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MYS Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MYS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guangdong Skychem and Shenzhen MYS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangdong Skychem and Shenzhen MYS

The main advantage of trading using opposite Guangdong Skychem and Shenzhen MYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Skychem position performs unexpectedly, Shenzhen MYS 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 MYS will offset losses from the drop in Shenzhen MYS's long position.
The idea behind Guangdong Skychem Technology and Shenzhen MYS Environmental 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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