Correlation Between ZJBC Information and Chongqing Brewery

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

Diversification Opportunities for ZJBC Information and Chongqing Brewery

0.39

Correlation Coefficient

ZJBC Information  Chongqing Brewery

Weak diversification

The 3 months correlation between ZJBC and Chongqing is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ZJBC Information Technology and Chongqing Brewery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Brewery 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 Chongqing Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Brewery has no effect on the direction of ZJBC Information i.e., ZJBC Information and Chongqing Brewery go up and down completely randomly.

Pair Corralation between ZJBC Information and Chongqing Brewery

Assuming the 90 days trading horizon ZJBC Information Technology is expected to generate 1.27 times more return on investment than Chongqing Brewery. However, ZJBC Information is 1.27 times more volatile than Chongqing Brewery Co. It trades about 0.16 of its potential returns per unit of risk. Chongqing Brewery Co is currently generating about -0.05 per unit of risk. If you would invest  187.00  in ZJBC Information Technology on October 4, 2024 and sell it today you would earn a total of  59.00  from holding ZJBC Information Technology or generate 31.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

ZJBC Information Technology  vs.  Chongqing Brewery Co

ZJBC Information Tec

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 12 (%) 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.

Chongqing Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chongqing Brewery Co 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.

Pair Trading with ZJBC Information and Chongqing Brewery

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

The idea behind ZJBC Information Technology and Chongqing Brewery 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.