Correlation Between Zhejiang Expressway and Shenzhen Investment
Can any of the company-specific risk be diversified away by investing in both Zhejiang Expressway 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 Zhejiang Expressway and Shenzhen Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhejiang Expressway Co and Shenzhen Investment Bay, you can compare the effects of market volatilities on Zhejiang Expressway 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 Zhejiang Expressway with a short position of Shenzhen Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Expressway and Shenzhen Investment.
Diversification Opportunities for Zhejiang Expressway and Shenzhen Investment
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Zhejiang and Shenzhen is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Expressway Co 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 Zhejiang Expressway 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 Zhejiang Expressway Co 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 Zhejiang Expressway i.e., Zhejiang Expressway and Shenzhen Investment go up and down completely randomly.
Pair Corralation between Zhejiang Expressway and Shenzhen Investment
Assuming the 90 days horizon Zhejiang Expressway is expected to generate 9.06 times less return on investment than Shenzhen Investment. But when comparing it to its historical volatility, Zhejiang Expressway Co is 3.0 times less risky than Shenzhen Investment. It trades about 0.02 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 Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Zhejiang Expressway Co vs. Shenzhen Investment Bay
Performance |
| Timeline |
| Zhejiang Expressway |
| Shenzhen Investment Bay |
Zhejiang Expressway and Shenzhen Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhejiang Expressway and Shenzhen Investment
The main advantage of trading using opposite Zhejiang Expressway and Shenzhen Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Expressway 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.| Zhejiang Expressway vs. Verra Mobility Corp | Zhejiang Expressway vs. HUMANA INC | Zhejiang Expressway vs. SCOR PK | Zhejiang Expressway vs. Aquagold International |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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