Correlation Between Zhongrun Resources and Financial Street

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

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

Diversification Opportunities for Zhongrun Resources and Financial Street

0.48

Correlation Coefficient

Zhongrun Resources  Financial Street

Very weak diversification

The 3 months correlation between Zhongrun and Financial is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Financial Street Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Street Holdings and Zhongrun Resources 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 Zhongrun Resources Investment are associated (or correlated) with Financial Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Street Holdings has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Financial Street go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Financial Street

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.76 times more return on investment than Financial Street. However, Zhongrun Resources is 1.76 times more volatile than Financial Street Holdings. It trades about 0.27 of its potential returns per unit of risk. Financial Street Holdings is currently generating about -0.5 per unit of risk. If you would invest  307.00  in Zhongrun Resources Investment on October 9, 2024 and sell it today you would earn a total of  65.00  from holding Zhongrun Resources Investment or generate 21.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Financial Street Holdings

Zhongrun Resources

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Financial Street Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zhongrun Resources and Financial Street

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

The idea behind Zhongrun Resources Investment and Financial Street Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.