Correlation Between Zotye Automobile and Dirui Industrial

Can any of the company-specific risk be diversified away by investing in both Zotye Automobile and Dirui Industrial 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 Zotye Automobile and Dirui Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zotye Automobile Co and Dirui Industrial Co, you can compare the effects of market volatilities on Zotye Automobile and Dirui Industrial 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 Zotye Automobile with a short position of Dirui Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zotye Automobile and Dirui Industrial.

Diversification Opportunities for Zotye Automobile and Dirui Industrial

0.69

Correlation Coefficient

Zotye Automobile  Dirui Industrial

Poor diversification

The 3 months correlation between Zotye and Dirui is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zotye Automobile Co and Dirui Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dirui Industrial and Zotye Automobile 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 Zotye Automobile Co are associated (or correlated) with Dirui Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dirui Industrial has no effect on the direction of Zotye Automobile i.e., Zotye Automobile and Dirui Industrial go up and down completely randomly.

Pair Corralation between Zotye Automobile and Dirui Industrial

Assuming the 90 days trading horizon Zotye Automobile Co is expected to generate 1.83 times more return on investment than Dirui Industrial. However, Zotye Automobile is 1.83 times more volatile than Dirui Industrial Co. It trades about -0.02 of its potential returns per unit of risk. Dirui Industrial Co is currently generating about -0.05 per unit of risk. If you would invest  251.00  in Zotye Automobile Co on December 29, 2024 and sell it today you would lose (21.00) from holding Zotye Automobile Co or give up 8.37% of portfolio value over 90 days.

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

Zotye Automobile Co  vs.  Dirui Industrial Co

Zotye Automobile

Risk-Adjusted Performance

Very Weak

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

Dirui Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dirui Industrial 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 Zotye Automobile and Dirui Industrial

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

The idea behind Zotye Automobile Co and Dirui Industrial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.