Correlation Between Zhongshan Public and Fiberhome Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Zhongshan Public and Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio 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 Fiberhome Telecommunication Technologies, you can compare the effects of market volatilities on Zhongshan Public and Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Public and Fiberhome Telecommunicatio.

Diversification Opportunities for Zhongshan Public and Fiberhome Telecommunicatio

0.94

Correlation Coefficient

Zhongshan Public  Fiberhome Telecommunicatio

Almost no diversification

The 3 months correlation between Zhongshan and Fiberhome is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between Zhongshan Public and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon Zhongshan Public is expected to generate 1.42 times less return on investment than Fiberhome Telecommunicatio. But when comparing it to its historical volatility, Zhongshan Public Utilities is 1.86 times less risky than Fiberhome Telecommunicatio. It trades about 0.05 of its potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,362  in Fiberhome Telecommunication Technologies on September 3, 2024 and sell it today you would earn a total of  461.00  from holding Fiberhome Telecommunication Technologies or generate 33.85% return on investment over 90 days.

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

Zhongshan Public Utilities  vs.  Fiberhome Telecommunication Te

Zhongshan Public Uti

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongshan Public and Fiberhome Telecommunicatio

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

The idea behind Zhongshan Public Utilities and Fiberhome Telecommunication Technologies 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.