Correlation Between Zhongrun Resources and Gansu Yasheng

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

Diversification Opportunities for Zhongrun Resources and Gansu Yasheng

0.76

Correlation Coefficient

Zhongrun Resources  Gansu Yasheng

Poor diversification

The 3 months correlation between Zhongrun and Gansu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Gansu Yasheng Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Yasheng Industrial 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 Gansu Yasheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Yasheng Industrial has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Gansu Yasheng go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Gansu Yasheng

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 1.87 times more return on investment than Gansu Yasheng. However, Zhongrun Resources is 1.87 times more volatile than Gansu Yasheng Industrial. It trades about 0.3 of its potential returns per unit of risk. Gansu Yasheng Industrial is currently generating about 0.09 per unit of risk. If you would invest  99.00  in Zhongrun Resources Investment on September 30, 2024 and sell it today you would earn a total of  302.00  from holding Zhongrun Resources Investment or generate 305.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Gansu Yasheng Industrial

Zhongrun Resources

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 35 (%) 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.

Gansu Yasheng Industrial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Yasheng Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Yasheng may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhongrun Resources and Gansu Yasheng

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

The idea behind Zhongrun Resources Investment and Gansu Yasheng Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.