Correlation Between ZJBC Information and Hangzhou Guotai

Can any of the company-specific risk be diversified away by investing in both ZJBC Information and Hangzhou Guotai 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 ZJBC Information and Hangzhou Guotai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZJBC Information Technology and Hangzhou Guotai Environmental, you can compare the effects of market volatilities on ZJBC Information and Hangzhou Guotai 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 ZJBC Information with a short position of Hangzhou Guotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZJBC Information and Hangzhou Guotai.

Diversification Opportunities for ZJBC Information and Hangzhou Guotai

0.64

Correlation Coefficient

ZJBC Information  Hangzhou Guotai

Poor diversification

The 3 months correlation between ZJBC and Hangzhou is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ZJBC Information Technology and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi and ZJBC Information 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 ZJBC Information Technology are associated (or correlated) with Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of ZJBC Information i.e., ZJBC Information and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between ZJBC Information and Hangzhou Guotai

Assuming the 90 days trading horizon ZJBC Information Technology is expected to generate 1.18 times more return on investment than Hangzhou Guotai. However, ZJBC Information is 1.18 times more volatile than Hangzhou Guotai Environmental. It trades about 0.19 of its potential returns per unit of risk. Hangzhou Guotai Environmental is currently generating about -0.01 per unit of risk. If you would invest  184.00  in ZJBC Information Technology on September 28, 2024 and sell it today you would earn a total of  70.00  from holding ZJBC Information Technology or generate 38.04% return on investment over 90 days.

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

ZJBC Information Technology  vs.  Hangzhou Guotai Environmental

ZJBC Information Tec

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Hangzhou Guotai Envi

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with ZJBC Information and Hangzhou Guotai

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

The idea behind ZJBC Information Technology and Hangzhou Guotai Environmental 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.