Correlation Between Zhongrun Resources and Tongding Interconnection

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

Diversification Opportunities for Zhongrun Resources and Tongding Interconnection

0.59

Correlation Coefficient

Zhongrun Resources  Tongding Interconnection

Very weak diversification

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

Pair Corralation between Zhongrun Resources and Tongding Interconnection

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.03 times more return on investment than Tongding Interconnection. However, Zhongrun Resources is 1.03 times more volatile than Tongding Interconnection Information. It trades about 0.12 of its potential returns per unit of risk. Tongding Interconnection Information 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Tongding Interconnection Infor

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.

Tongding Interconnection

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tongding Interconnection Information 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 Tongding Interconnection

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

The idea behind Zhongrun Resources Investment and Tongding Interconnection Information 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.