Correlation Between Shenzhen Centralcon and Zoje Resources

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

By analyzing existing cross correlation between Shenzhen Centralcon Investment and Zoje Resources Investment, you can compare the effects of market volatilities on Shenzhen Centralcon and Zoje Resources 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 Centralcon with a short position of Zoje Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Centralcon and Zoje Resources.

Diversification Opportunities for Shenzhen Centralcon and Zoje Resources

0.85

Correlation Coefficient

Shenzhen Centralcon  Zoje Resources

Very poor diversification

The 3 months correlation between Shenzhen and Zoje is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Centralcon Investment and Zoje Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoje Resources Investment and Shenzhen Centralcon 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 Centralcon Investment are associated (or correlated) with Zoje Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoje Resources Investment has no effect on the direction of Shenzhen Centralcon i.e., Shenzhen Centralcon and Zoje Resources go up and down completely randomly.

Pair Corralation between Shenzhen Centralcon and Zoje Resources

Assuming the 90 days trading horizon Shenzhen Centralcon is expected to generate 2.17 times less return on investment than Zoje Resources. But when comparing it to its historical volatility, Shenzhen Centralcon Investment is 1.68 times less risky than Zoje Resources. It trades about 0.13 of its potential returns per unit of risk. Zoje Resources Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  254.00  in Zoje Resources Investment on September 20, 2024 and sell it today you would earn a total of  38.00  from holding Zoje Resources Investment or generate 14.96% return on investment over 90 days.

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

Shenzhen Centralcon Investment  vs.  Zoje Resources Investment

Shenzhen Centralcon

Risk-Adjusted Performance

12 of 100

Good

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

Zoje Resources Investment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoje Resources Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoje Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Centralcon and Zoje Resources

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

The idea behind Shenzhen Centralcon Investment and Zoje Resources Investment 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 Transaction History module to view history of all your transactions and understand their impact on performance.