Correlation Between Henan Shuanghui and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both Henan Shuanghui and Zhengzhou Coal 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 Henan Shuanghui and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henan Shuanghui Investment and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Henan Shuanghui and Zhengzhou Coal 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 Henan Shuanghui with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shuanghui and Zhengzhou Coal.

Diversification Opportunities for Henan Shuanghui and Zhengzhou Coal

0.54

Correlation Coefficient

Henan Shuanghui  Zhengzhou Coal

Very weak diversification

The 3 months correlation between Henan and Zhengzhou is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Henan Shuanghui 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 Henan Shuanghui Investment are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Henan Shuanghui i.e., Henan Shuanghui and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Henan Shuanghui and Zhengzhou Coal

Assuming the 90 days trading horizon Henan Shuanghui Investment is expected to generate 0.79 times more return on investment than Zhengzhou Coal. However, Henan Shuanghui Investment is 1.26 times less risky than Zhengzhou Coal. It trades about -0.04 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about -0.08 per unit of risk. If you would invest  2,680  in Henan Shuanghui Investment on October 8, 2024 and sell it today you would lose (113.00) from holding Henan Shuanghui Investment or give up 4.22% of portfolio value over 90 days.

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

Henan Shuanghui Investment  vs.  Zhengzhou Coal Mining

Henan Shuanghui Inve

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhengzhou Coal Mining 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 Henan Shuanghui and Zhengzhou Coal

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

The idea behind Henan Shuanghui Investment and Zhengzhou Coal Mining 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.