Correlation Between Zhongshan Public and Xinjiang Daqo

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

Diversification Opportunities for Zhongshan Public and Xinjiang Daqo

0.16

Correlation Coefficient

Zhongshan Public  Xinjiang Daqo

Average diversification

The 3 months correlation between Zhongshan and Xinjiang is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Xinjiang Daqo New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Daqo New 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 Xinjiang Daqo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Daqo New has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Xinjiang Daqo go up and down completely randomly.

Pair Corralation between Zhongshan Public and Xinjiang Daqo

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 0.53 times more return on investment than Xinjiang Daqo. However, Zhongshan Public Utilities is 1.88 times less risky than Xinjiang Daqo. It trades about 0.05 of its potential returns per unit of risk. Xinjiang Daqo New is currently generating about -0.03 per unit of risk. If you would invest  678.00  in Zhongshan Public Utilities on October 5, 2024 and sell it today you would earn a total of  208.00  from holding Zhongshan Public Utilities or generate 30.68% 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.  Xinjiang Daqo New

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.

Xinjiang Daqo New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xinjiang Daqo New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhongshan Public and Xinjiang Daqo

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

The idea behind Zhongshan Public Utilities and Xinjiang Daqo New 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.