Correlation Between Zotye Automobile and Chongqing Rural

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

Diversification Opportunities for Zotye Automobile and Chongqing Rural

0.59

Correlation Coefficient

Zotye Automobile  Chongqing Rural

Very weak diversification

The 3 months correlation between Zotye and Chongqing is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zotye Automobile Co and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Zotye Automobile i.e., Zotye Automobile and Chongqing Rural go up and down completely randomly.

Pair Corralation between Zotye Automobile and Chongqing Rural

Assuming the 90 days trading horizon Zotye Automobile is expected to generate 1.46 times less return on investment than Chongqing Rural. In addition to that, Zotye Automobile is 2.42 times more volatile than Chongqing Rural Commercial. It trades about 0.03 of its total potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.09 per unit of volatility. If you would invest  409.00  in Chongqing Rural Commercial on September 20, 2024 and sell it today you would earn a total of  166.00  from holding Chongqing Rural Commercial or generate 40.59% return on investment over 90 days.

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

Zotye Automobile Co  vs.  Chongqing Rural Commercial

Zotye Automobile

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zotye Automobile Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zotye Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Rural Comm

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Rural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zotye Automobile and Chongqing Rural

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

The idea behind Zotye Automobile Co and Chongqing Rural Commercial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.