Correlation Between Shenzhen Shenbao and YLZ Information

Can any of the company-specific risk be diversified away by investing in both Shenzhen Shenbao and YLZ Information 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 Shenzhen Shenbao and YLZ Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Shenbao Industrial and YLZ Information Tech, you can compare the effects of market volatilities on Shenzhen Shenbao and YLZ Information 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 Shenzhen Shenbao with a short position of YLZ Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Shenbao and YLZ Information.

Diversification Opportunities for Shenzhen Shenbao and YLZ Information

0.92

Correlation Coefficient

Shenzhen Shenbao  YLZ Information

Almost no diversification

The 3 months correlation between Shenzhen and YLZ is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Shenbao Industrial and YLZ Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YLZ Information Tech and Shenzhen Shenbao 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 Shenzhen Shenbao Industrial are associated (or correlated) with YLZ Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YLZ Information Tech has no effect on the direction of Shenzhen Shenbao i.e., Shenzhen Shenbao and YLZ Information go up and down completely randomly.

Pair Corralation between Shenzhen Shenbao and YLZ Information

Assuming the 90 days trading horizon Shenzhen Shenbao is expected to generate 1.86 times less return on investment than YLZ Information. But when comparing it to its historical volatility, Shenzhen Shenbao Industrial is 1.64 times less risky than YLZ Information. It trades about 0.13 of its potential returns per unit of risk. YLZ Information Tech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  270.00  in YLZ Information Tech on September 3, 2024 and sell it today you would earn a total of  98.00  from holding YLZ Information Tech or generate 36.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Shenzhen Shenbao Industrial  vs.  YLZ Information Tech

Shenzhen Shenbao Ind

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Shenbao Industrial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Shenbao sustained solid returns over the last few months and may actually be approaching a breakup point.

YLZ Information Tech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in YLZ Information Tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YLZ Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Shenbao and YLZ Information

The main advantage of trading using opposite Shenzhen Shenbao and YLZ Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Shenbao position performs unexpectedly, YLZ Information 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 YLZ Information will offset losses from the drop in YLZ Information's long position.

The idea behind Shenzhen Shenbao Industrial and YLZ Information Tech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.