Correlation Analysis between the Return of a Single Stock and the Market Index Based on the CAPM Model

Abstract

In recent years, with the rapid development of information technology, it has been difficult for people to make investment decisions due to the increasing amount of stock data information. Quantitative investment is a new investment strategy emerging in this situation. Studying quantitative investment strategy and using the CAPM model for data analysis can get a more objective and efficient investment strategy. This paper analyzes the correlation between stock return rate and market index by collecting daily data of 50 Stocks in Shanghai and Shenzhen A-share markets and carrying out an empirical test based on the CAPM model. Finally, it is concluded that the fluctuation of stock prices is highly correlated with the change of market indexes, especially in some industries such as materials and retail. Therefore, the instability of SSE and Shenzhen indexes can be taken into consideration to a large extent when selecting investment objects.