Correlation Between Zhongrun Resources and Shandong Publishing

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

Diversification Opportunities for Zhongrun Resources and Shandong Publishing

-0.7

Correlation Coefficient

Zhongrun Resources  Shandong Publishing

Excellent diversification

The 3 months correlation between Zhongrun and Shandong is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and Shandong Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Publishing Media 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 Shandong Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Publishing Media has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and Shandong Publishing go up and down completely randomly.

Pair Corralation between Zhongrun Resources and Shandong Publishing

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 2.11 times more return on investment than Shandong Publishing. However, Zhongrun Resources is 2.11 times more volatile than Shandong Publishing Media. It trades about 0.15 of its potential returns per unit of risk. Shandong Publishing Media is currently generating about -0.11 per unit of risk. If you would invest  401.00  in Zhongrun Resources Investment on December 27, 2024 and sell it today you would earn a total of  136.00  from holding Zhongrun Resources Investment or generate 33.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Zhongrun Resources Investment  vs.  Shandong Publishing Media

Zhongrun Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 12 (%) 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.

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Publishing Media 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 Shandong Publishing

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

The idea behind Zhongrun Resources Investment and Shandong Publishing Media 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.