Correlation Between Zhongrun Resources and Bengang Steel

Can any of the company-specific risk be diversified away by investing in both Zhongrun Resources and Bengang Steel 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 Bengang Steel 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 Bengang Steel Plates, you can compare the effects of market volatilities on Zhongrun Resources and Bengang Steel 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 Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongrun Resources and Bengang Steel.

Diversification Opportunities for Zhongrun Resources and Bengang Steel

0.65

Correlation Coefficient

Zhongrun Resources  Bengang Steel

Poor diversification

The 3 months correlation between Zhongrun and Bengang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates 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 Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Bengang Steel go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Bengang Steel

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.68 times more return on investment than Bengang Steel. However, Zhongrun Resources is 1.68 times more volatile than Bengang Steel Plates. It trades about 0.01 of its potential returns per unit of risk. Bengang Steel Plates is currently generating about 0.0 per unit of risk. If you would invest  394.00  in Zhongrun Resources Investment on September 20, 2024 and sell it today you would lose (64.00) from holding Zhongrun Resources Investment or give up 16.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Bengang Steel Plates

Zhongrun Resources

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 33 (%) 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.

Bengang Steel Plates

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongrun Resources and Bengang Steel

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

The idea behind Zhongrun Resources Investment and Bengang Steel Plates 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.