Correlation Between Transurban and Shenzhen Investment
Can any of the company-specific risk be diversified away by investing in both Transurban and Shenzhen Investment 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 Transurban and Shenzhen Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transurban Group and Shenzhen Investment Bay, you can compare the effects of market volatilities on Transurban and Shenzhen Investment 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 Transurban with a short position of Shenzhen Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transurban and Shenzhen Investment.
Diversification Opportunities for Transurban and Shenzhen Investment
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Transurban and Shenzhen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Transurban Group and Shenzhen Investment Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment Bay and Transurban 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 Transurban Group are associated (or correlated) with Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment Bay has no effect on the direction of Transurban i.e., Transurban and Shenzhen Investment go up and down completely randomly.
Pair Corralation between Transurban and Shenzhen Investment
Assuming the 90 days horizon Transurban is expected to generate 4.01 times less return on investment than Shenzhen Investment. But when comparing it to its historical volatility, Transurban Group is 2.61 times less risky than Shenzhen Investment. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Investment Bay is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 191.00 in Shenzhen Investment Bay on September 1, 2024 and sell it today you would earn a total of 71.00 from holding Shenzhen Investment Bay or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.43% |
| Values | Daily Returns |
Transurban Group vs. Shenzhen Investment Bay
Performance |
| Timeline |
| Transurban Group |
| Shenzhen Investment Bay |
Transurban and Shenzhen Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transurban and Shenzhen Investment
The main advantage of trading using opposite Transurban and Shenzhen Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transurban position performs unexpectedly, Shenzhen Investment 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 Investment will offset losses from the drop in Shenzhen Investment's long position.| Transurban vs. BCE Inc | Transurban vs. Digi International | Transurban vs. Sphere Entertainment Co | Transurban vs. Anterix |
| Shenzhen Investment vs. Jiangsu Expressway Co | Shenzhen Investment vs. Jiangsu Expressway | Shenzhen Investment vs. Zhejiang Expressway Co | Shenzhen Investment vs. Yuexiu Transport Infrastructure |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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