Correlation Between Zoomlion Heavy and Yunnan Chuangxin

Can any of the company-specific risk be diversified away by investing in both Zoomlion Heavy and Yunnan Chuangxin 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 Yunnan Chuangxin 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 Yunnan Chuangxin New, you can compare the effects of market volatilities on Zoomlion Heavy and Yunnan Chuangxin 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 Yunnan Chuangxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoomlion Heavy and Yunnan Chuangxin.

Diversification Opportunities for Zoomlion Heavy and Yunnan Chuangxin

0.4

Correlation Coefficient

Zoomlion Heavy  Yunnan Chuangxin

Very weak diversification

The 3 months correlation between Zoomlion and Yunnan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Zoomlion Heavy Industry and Yunnan Chuangxin New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Chuangxin New 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 Yunnan Chuangxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Chuangxin New has no effect on the direction of Zoomlion Heavy i.e., Zoomlion Heavy and Yunnan Chuangxin go up and down completely randomly.

Pair Corralation between Zoomlion Heavy and Yunnan Chuangxin

Assuming the 90 days trading horizon Zoomlion Heavy Industry is expected to generate 0.5 times more return on investment than Yunnan Chuangxin. However, Zoomlion Heavy Industry is 1.99 times less risky than Yunnan Chuangxin. It trades about -0.05 of its potential returns per unit of risk. Yunnan Chuangxin New is currently generating about -0.06 per unit of risk. If you would invest  710.00  in Zoomlion Heavy Industry on October 14, 2024 and sell it today you would lose (37.00) from holding Zoomlion Heavy Industry or give up 5.21% of portfolio value over 90 days.

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

Zoomlion Heavy Industry  vs.  Yunnan Chuangxin New

Zoomlion Heavy Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoomlion Heavy Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zoomlion Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yunnan Chuangxin New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yunnan Chuangxin New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zoomlion Heavy and Yunnan Chuangxin

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

The idea behind Zoomlion Heavy Industry and Yunnan Chuangxin New 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.