Correlation Between Zhongrun Resources and Ligao Foods

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

Diversification Opportunities for Zhongrun Resources and Ligao Foods

0.61

Correlation Coefficient

Zhongrun Resources  Ligao Foods

Poor diversification

The 3 months correlation between Zhongrun and Ligao is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Ligao Foods CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligao Foods CoLtd 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 Ligao Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligao Foods CoLtd has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Ligao Foods go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Ligao Foods

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.07 times more return on investment than Ligao Foods. However, Zhongrun Resources is 1.07 times more volatile than Ligao Foods CoLtd. It trades about 0.39 of its potential returns per unit of risk. Ligao Foods CoLtd is currently generating about 0.0 per unit of risk. If you would invest  145.00  in Zhongrun Resources Investment on October 8, 2024 and sell it today you would earn a total of  227.00  from holding Zhongrun Resources Investment or generate 156.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Ligao Foods CoLtd

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.

Ligao Foods CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ligao Foods CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ligao Foods 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 Ligao Foods

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

The idea behind Zhongrun Resources Investment and Ligao Foods CoLtd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.