Correlation Between Zotye Automobile and Wintao Communications

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

Diversification Opportunities for Zotye Automobile and Wintao Communications

0.57

Correlation Coefficient

Zotye Automobile  Wintao Communications

Very weak diversification

The 3 months correlation between Zotye and Wintao is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zotye Automobile Co and Wintao Communications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintao Communications 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 Wintao Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintao Communications has no effect on the direction of Zotye Automobile i.e., Zotye Automobile and Wintao Communications go up and down completely randomly.

Pair Corralation between Zotye Automobile and Wintao Communications

Assuming the 90 days trading horizon Zotye Automobile Co is expected to under-perform the Wintao Communications. In addition to that, Zotye Automobile is 1.54 times more volatile than Wintao Communications Co. It trades about -0.29 of its total potential returns per unit of risk. Wintao Communications Co is currently generating about -0.32 per unit of volatility. If you would invest  2,525  in Wintao Communications Co on October 8, 2024 and sell it today you would lose (488.00) from holding Wintao Communications Co or give up 19.33% of portfolio value over 90 days.

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

Zotye Automobile Co  vs.  Wintao Communications Co

Zotye Automobile

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zotye Automobile Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zotye Automobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wintao Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wintao Communications Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zotye Automobile and Wintao Communications

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

The idea behind Zotye Automobile Co and Wintao Communications 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.