Correlation Between China Nonferrous and Ziel Home

Can any of the company-specific risk be diversified away by investing in both China Nonferrous and Ziel Home 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 China Nonferrous and Ziel Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Nonferrous Metal and Ziel Home Furnishing, you can compare the effects of market volatilities on China Nonferrous and Ziel Home 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 China Nonferrous with a short position of Ziel Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Ziel Home.

Diversification Opportunities for China Nonferrous and Ziel Home

0.73

Correlation Coefficient

China Nonferrous  Ziel Home

Poor diversification

The 3 months correlation between China and Ziel is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Ziel Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziel Home Furnishing and China Nonferrous 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 China Nonferrous Metal are associated (or correlated) with Ziel Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziel Home Furnishing has no effect on the direction of China Nonferrous i.e., China Nonferrous and Ziel Home go up and down completely randomly.

Pair Corralation between China Nonferrous and Ziel Home

Assuming the 90 days trading horizon China Nonferrous Metal is expected to generate 0.68 times more return on investment than Ziel Home. However, China Nonferrous Metal is 1.46 times less risky than Ziel Home. It trades about 0.01 of its potential returns per unit of risk. Ziel Home Furnishing is currently generating about -0.01 per unit of risk. If you would invest  508.00  in China Nonferrous Metal on September 28, 2024 and sell it today you would lose (8.00) from holding China Nonferrous Metal or give up 1.57% of portfolio value over 90 days.

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

China Nonferrous Metal  vs.  Ziel Home Furnishing

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ziel Home Furnishing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Nonferrous and Ziel Home

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

The idea behind China Nonferrous Metal and Ziel Home Furnishing 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.