Correlation Between Zhongshan Public and China Marine

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

Diversification Opportunities for Zhongshan Public and China Marine

0.09

Correlation Coefficient

Zhongshan Public  China Marine

Significant diversification

The 3 months correlation between Zhongshan and China is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and China Marine Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Marine Information 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 Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Marine Information has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and China Marine go up and down completely randomly.

Pair Corralation between Zhongshan Public and China Marine

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 0.45 times more return on investment than China Marine. However, Zhongshan Public Utilities is 2.21 times less risky than China Marine. It trades about 0.02 of its potential returns per unit of risk. China Marine Information is currently generating about 0.0 per unit of risk. If you would invest  850.00  in Zhongshan Public Utilities on October 11, 2024 and sell it today you would earn a total of  15.00  from holding Zhongshan Public Utilities or generate 1.76% return on investment over 90 days.

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

Zhongshan Public Utilities  vs.  China Marine Information

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 Marine Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Marine Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhongshan Public and China Marine

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

The idea behind Zhongshan Public Utilities and China Marine Information 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.