Correlation Between Zoje Resources and Lier Chemical

Can any of the company-specific risk be diversified away by investing in both Zoje Resources and Lier Chemical 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 Zoje Resources and Lier Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zoje Resources Investment and Lier Chemical Co, you can compare the effects of market volatilities on Zoje Resources and Lier Chemical 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 Zoje Resources with a short position of Lier Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoje Resources and Lier Chemical.

Diversification Opportunities for Zoje Resources and Lier Chemical

0.77

Correlation Coefficient

Zoje Resources  Lier Chemical

Poor diversification

The 3 months correlation between Zoje and Lier is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Zoje Resources Investment and Lier Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lier Chemical and Zoje Resources 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 Zoje Resources Investment are associated (or correlated) with Lier Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lier Chemical has no effect on the direction of Zoje Resources i.e., Zoje Resources and Lier Chemical go up and down completely randomly.

Pair Corralation between Zoje Resources and Lier Chemical

Assuming the 90 days trading horizon Zoje Resources Investment is expected to generate 1.91 times more return on investment than Lier Chemical. However, Zoje Resources is 1.91 times more volatile than Lier Chemical Co. It trades about 0.07 of its potential returns per unit of risk. Lier Chemical Co is currently generating about -0.08 per unit of risk. If you would invest  118.00  in Zoje Resources Investment on September 29, 2024 and sell it today you would earn a total of  145.00  from holding Zoje Resources Investment or generate 122.88% return on investment over 90 days.

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

Zoje Resources Investment  vs.  Lier Chemical Co

Zoje Resources Investment

Risk-Adjusted Performance

9 of 100

OK

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

Lier Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zoje Resources and Lier Chemical

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

The idea behind Zoje Resources Investment and Lier Chemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.