Correlation Between Zhongrun Resources and Yingde Greatchem

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

Diversification Opportunities for Zhongrun Resources and Yingde Greatchem

0.43

Correlation Coefficient

Zhongrun Resources  Yingde Greatchem

Very weak diversification

The 3 months correlation between Zhongrun and Yingde is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Yingde Greatchem Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yingde Greatchem Che 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 Yingde Greatchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yingde Greatchem Che has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Yingde Greatchem go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Yingde Greatchem

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.83 times more return on investment than Yingde Greatchem. However, Zhongrun Resources is 1.83 times more volatile than Yingde Greatchem Chemicals. It trades about 0.2 of its potential returns per unit of risk. Yingde Greatchem Chemicals is currently generating about -0.27 per unit of risk. If you would invest  342.00  in Zhongrun Resources Investment on October 4, 2024 and sell it today you would earn a total of  55.00  from holding Zhongrun Resources Investment or generate 16.08% 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.  Yingde Greatchem Chemicals

Zhongrun Resources

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 34 (%) 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.

Yingde Greatchem Che

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yingde Greatchem Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhongrun Resources and Yingde Greatchem

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

The idea behind Zhongrun Resources Investment and Yingde Greatchem Chemicals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..