Correlation Between Zoomlion Heavy and Qinghai Salt

Can any of the company-specific risk be diversified away by investing in both Zoomlion Heavy and Qinghai Salt 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 Zoomlion Heavy and Qinghai Salt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zoomlion Heavy Industry and Qinghai Salt Lake, you can compare the effects of market volatilities on Zoomlion Heavy and Qinghai Salt 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 Zoomlion Heavy with a short position of Qinghai Salt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoomlion Heavy and Qinghai Salt.

Diversification Opportunities for Zoomlion Heavy and Qinghai Salt

0.87

Correlation Coefficient

Zoomlion Heavy  Qinghai Salt

Very poor diversification

The 3 months correlation between Zoomlion and Qinghai is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Zoomlion Heavy Industry and Qinghai Salt Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghai Salt Lake and Zoomlion Heavy 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 Zoomlion Heavy Industry are associated (or correlated) with Qinghai Salt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghai Salt Lake has no effect on the direction of Zoomlion Heavy i.e., Zoomlion Heavy and Qinghai Salt go up and down completely randomly.

Pair Corralation between Zoomlion Heavy and Qinghai Salt

Assuming the 90 days trading horizon Zoomlion Heavy Industry is expected to under-perform the Qinghai Salt. But the stock apears to be less risky and, when comparing its historical volatility, Zoomlion Heavy Industry is 1.03 times less risky than Qinghai Salt. The stock trades about -0.04 of its potential returns per unit of risk. The Qinghai Salt Lake is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Qinghai Salt Lake on September 24, 2024 and sell it today you would lose (32.00) from holding Qinghai Salt Lake or give up 1.88% of portfolio value over 90 days.

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

Zoomlion Heavy Industry  vs.  Qinghai Salt Lake

Zoomlion Heavy Industry

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zoomlion Heavy Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoomlion Heavy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qinghai Salt Lake

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qinghai Salt Lake are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qinghai Salt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zoomlion Heavy and Qinghai Salt

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

The idea behind Zoomlion Heavy Industry and Qinghai Salt Lake 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.