Correlation Between Zhongshan Public and Inspur Software

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

Diversification Opportunities for Zhongshan Public and Inspur Software

0.43

Correlation Coefficient

Zhongshan Public  Inspur Software

Very weak diversification

The 3 months correlation between Zhongshan and Inspur is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software 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 Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Inspur Software go up and down completely randomly.

Pair Corralation between Zhongshan Public and Inspur Software

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 0.56 times more return on investment than Inspur Software. However, Zhongshan Public Utilities is 1.78 times less risky than Inspur Software. It trades about -0.08 of its potential returns per unit of risk. Inspur Software Co is currently generating about -0.05 per unit of risk. If you would invest  994.00  in Zhongshan Public Utilities on October 7, 2024 and sell it today you would lose (114.00) from holding Zhongshan Public Utilities or give up 11.47% of portfolio value over 90 days.

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

Zhongshan Public Utilities  vs.  Inspur Software Co

Zhongshan Public Uti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongshan Public Utilities 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.

Inspur Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspur Software Co 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 Zhongshan Public and Inspur Software

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

The idea behind Zhongshan Public Utilities and Inspur Software Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.