Correlation Between Zhongshan Public and China Asset

Can any of the company-specific risk be diversified away by investing in both Zhongshan Public 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 Zhongshan Public and China Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongshan Public Utilities and China Asset Management, you can compare the effects of market volatilities on Zhongshan Public 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 Zhongshan Public with a short position of China Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Public and China Asset.

Diversification Opportunities for Zhongshan Public and China Asset

0.36

Correlation Coefficient

Zhongshan Public  China Asset

Weak diversification

The 3 months correlation between Zhongshan and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities 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 Zhongshan Public 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 Zhongshan Public Utilities 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 Zhongshan Public i.e., Zhongshan Public and China Asset go up and down completely randomly.

Pair Corralation between Zhongshan Public and China Asset

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to under-perform the China Asset. In addition to that, Zhongshan Public is 1.76 times more volatile than China Asset Management. It trades about -0.2 of its total potential returns per unit of risk. China Asset Management is currently generating about 0.45 per unit of volatility. If you would invest  341.00  in China Asset Management on October 11, 2024 and sell it today you would earn a total of  29.00  from holding China Asset Management or generate 8.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Zhongshan Public Utilities  vs.  China Asset Management

Zhongshan Public Uti

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongshan Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Zhongshan Public and China Asset

The main advantage of trading using opposite Zhongshan Public and China Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongshan Public 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 Zhongshan Public Utilities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.