Correlation Between Zhongshan Public and Industrial Bank

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

Diversification Opportunities for Zhongshan Public and Industrial Bank

0.22

Correlation Coefficient

Zhongshan Public  Industrial Bank

Modest diversification

The 3 months correlation between Zhongshan and Industrial is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Industrial Bank go up and down completely randomly.

Pair Corralation between Zhongshan Public and Industrial Bank

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 1.09 times more return on investment than Industrial Bank. However, Zhongshan Public is 1.09 times more volatile than Industrial Bank Co. It trades about 0.05 of its potential returns per unit of risk. Industrial Bank Co is currently generating about 0.03 per unit of risk. If you would invest  667.00  in Zhongshan Public Utilities on October 4, 2024 and sell it today you would earn a total of  256.00  from holding Zhongshan Public Utilities or generate 38.38% 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.  Industrial Bank 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 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.

Industrial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial Bank Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial Bank 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 Industrial Bank

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

The idea behind Zhongshan Public Utilities and Industrial Bank 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.