Correlation Between Zhongrun Resources and China Asset

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

Diversification Opportunities for Zhongrun Resources and China Asset

0.49

Correlation Coefficient

Zhongrun Resources  China Asset

Very weak diversification

The 3 months correlation between Zhongrun and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management 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 China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and China Asset go up and down completely randomly.

Pair Corralation between Zhongrun Resources and China Asset

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 4.74 times more return on investment than China Asset. However, Zhongrun Resources is 4.74 times more volatile than China Asset Management. It trades about 0.02 of its potential returns per unit of risk. China Asset Management is currently generating about 0.08 per unit of risk. If you would invest  326.00  in Zhongrun Resources Investment on October 10, 2024 and sell it today you would earn a total of  31.00  from holding Zhongrun Resources Investment or generate 9.51% 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.  China Asset Management

Zhongrun Resources

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 29 (%) 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.

China Asset Management

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongrun Resources and China Asset

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

The idea behind Zhongrun Resources Investment and China Asset Management 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.