Correlation Between Zhongrun Resources and Zoje Resources

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

Diversification Opportunities for Zhongrun Resources and Zoje Resources

-0.59

Correlation Coefficient

Zhongrun Resources  Zoje Resources

Excellent diversification

The 3 months correlation between Zhongrun and Zoje is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Zoje Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoje Resources Investment 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 Zoje Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoje Resources Investment has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Zoje Resources go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Zoje Resources

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.57 times more return on investment than Zoje Resources. However, Zhongrun Resources is 1.57 times more volatile than Zoje Resources Investment. It trades about 0.12 of its potential returns per unit of risk. Zoje Resources Investment is currently generating about -0.04 per unit of risk. If you would invest  422.00  in Zhongrun Resources Investment on December 26, 2024 and sell it today you would earn a total of  99.00  from holding Zhongrun Resources Investment or generate 23.46% return on investment over 90 days.

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

Zhongrun Resources Investment  vs.  Zoje Resources Investment

Zhongrun Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 9 (%) 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.

Zoje Resources Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoje Resources Investment 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 Zhongrun Resources and Zoje Resources

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

The idea behind Zhongrun Resources Investment and Zoje Resources Investment 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.