Correlation Between Zhejiang Qianjiang and Shanghai Ziyan

Can any of the company-specific risk be diversified away by investing in both Zhejiang Qianjiang and Shanghai Ziyan 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 Zhejiang Qianjiang and Shanghai Ziyan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Qianjiang Motorcycle and Shanghai Ziyan Foods, you can compare the effects of market volatilities on Zhejiang Qianjiang and Shanghai Ziyan 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 Zhejiang Qianjiang with a short position of Shanghai Ziyan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Qianjiang and Shanghai Ziyan.

Diversification Opportunities for Zhejiang Qianjiang and Shanghai Ziyan

-0.53

Correlation Coefficient

Zhejiang Qianjiang  Shanghai Ziyan

Excellent diversification

The 3 months correlation between Zhejiang and Shanghai is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Qianjiang Motorcycle and Shanghai Ziyan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Ziyan Foods and Zhejiang Qianjiang 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 Zhejiang Qianjiang Motorcycle are associated (or correlated) with Shanghai Ziyan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Ziyan Foods has no effect on the direction of Zhejiang Qianjiang i.e., Zhejiang Qianjiang and Shanghai Ziyan go up and down completely randomly.

Pair Corralation between Zhejiang Qianjiang and Shanghai Ziyan

Assuming the 90 days trading horizon Zhejiang Qianjiang Motorcycle is expected to generate 0.78 times more return on investment than Shanghai Ziyan. However, Zhejiang Qianjiang Motorcycle is 1.28 times less risky than Shanghai Ziyan. It trades about 0.05 of its potential returns per unit of risk. Shanghai Ziyan Foods is currently generating about -0.01 per unit of risk. If you would invest  1,695  in Zhejiang Qianjiang Motorcycle on December 3, 2024 and sell it today you would earn a total of  110.00  from holding Zhejiang Qianjiang Motorcycle or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Zhejiang Qianjiang Motorcycle  vs.  Shanghai Ziyan Foods

Zhejiang Qianjiang

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shanghai Ziyan Foods

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhejiang Qianjiang and Shanghai Ziyan

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

The idea behind Zhejiang Qianjiang Motorcycle and Shanghai Ziyan Foods 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.