Correlation Between Zoje Resources and Hengdian Entertainment

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

Diversification Opportunities for Zoje Resources and Hengdian Entertainment

0.6

Correlation Coefficient

Zoje Resources  Hengdian Entertainment

Poor diversification

The 3 months correlation between Zoje and Hengdian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zoje Resources Investment and Hengdian Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengdian Entertainment 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 Hengdian Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengdian Entertainment has no effect on the direction of Zoje Resources i.e., Zoje Resources and Hengdian Entertainment go up and down completely randomly.

Pair Corralation between Zoje Resources and Hengdian Entertainment

Assuming the 90 days trading horizon Zoje Resources Investment is expected to generate 0.65 times more return on investment than Hengdian Entertainment. However, Zoje Resources Investment is 1.55 times less risky than Hengdian Entertainment. It trades about -0.04 of its potential returns per unit of risk. Hengdian Entertainment Co is currently generating about -0.07 per unit of risk. If you would invest  258.00  in Zoje Resources Investment on December 26, 2024 and sell it today you would lose (19.00) from holding Zoje Resources Investment or give up 7.36% of portfolio value over 90 days.

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

Zoje Resources Investment  vs.  Hengdian Entertainment Co

Zoje Resources Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoje Resources Investment 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.

Hengdian Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hengdian Entertainment 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zoje Resources and Hengdian Entertainment

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

The idea behind Zoje Resources Investment and Hengdian Entertainment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.