Correlation Between Shandong and Zhongtong Guomai

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

By analyzing existing cross correlation between Shandong Hi Speed RoadBridge and Zhongtong Guomai Communication, you can compare the effects of market volatilities on Shandong and Zhongtong Guomai 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 Shandong with a short position of Zhongtong Guomai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong and Zhongtong Guomai.

Diversification Opportunities for Shandong and Zhongtong Guomai

0.78

Correlation Coefficient

Shandong  Zhongtong Guomai

Poor diversification

The 3 months correlation between Shandong and Zhongtong is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Hi Speed RoadBridge and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com and Shandong 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 Shandong Hi Speed RoadBridge are associated (or correlated) with Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Shandong i.e., Shandong and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Shandong and Zhongtong Guomai

Assuming the 90 days trading horizon Shandong is expected to generate 7.31 times less return on investment than Zhongtong Guomai. But when comparing it to its historical volatility, Shandong Hi Speed RoadBridge is 2.14 times less risky than Zhongtong Guomai. It trades about 0.03 of its potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  495.00  in Zhongtong Guomai Communication on October 9, 2024 and sell it today you would earn a total of  408.00  from holding Zhongtong Guomai Communication or generate 82.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.45%
Values	Daily Returns

Shandong Hi Speed RoadBridge  vs.  Zhongtong Guomai Communication

Shandong Hi Speed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhongtong Guomai Com

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong and Zhongtong Guomai

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

The idea behind Shandong Hi Speed RoadBridge and Zhongtong Guomai Communication 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.