Correlation Between Cangzhou Mingzhu and ZYF Lopsking

Can any of the company-specific risk be diversified away by investing in both Cangzhou Mingzhu and ZYF Lopsking 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 Cangzhou Mingzhu and ZYF Lopsking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cangzhou Mingzhu Plastic and ZYF Lopsking Aluminum, you can compare the effects of market volatilities on Cangzhou Mingzhu and ZYF Lopsking 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 Cangzhou Mingzhu with a short position of ZYF Lopsking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cangzhou Mingzhu and ZYF Lopsking.

Diversification Opportunities for Cangzhou Mingzhu and ZYF Lopsking

0.95

Correlation Coefficient

Cangzhou Mingzhu  ZYF Lopsking

Almost no diversification

The 3 months correlation between Cangzhou and ZYF is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cangzhou Mingzhu Plastic and ZYF Lopsking Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZYF Lopsking Aluminum and Cangzhou Mingzhu 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 Cangzhou Mingzhu Plastic are associated (or correlated) with ZYF Lopsking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZYF Lopsking Aluminum has no effect on the direction of Cangzhou Mingzhu i.e., Cangzhou Mingzhu and ZYF Lopsking go up and down completely randomly.

Pair Corralation between Cangzhou Mingzhu and ZYF Lopsking

Assuming the 90 days trading horizon Cangzhou Mingzhu Plastic is expected to generate 1.28 times more return on investment than ZYF Lopsking. However, Cangzhou Mingzhu is 1.28 times more volatile than ZYF Lopsking Aluminum. It trades about 0.08 of its potential returns per unit of risk. ZYF Lopsking Aluminum is currently generating about 0.09 per unit of risk. If you would invest  360.00  in Cangzhou Mingzhu Plastic on September 20, 2024 and sell it today you would earn a total of  17.00  from holding Cangzhou Mingzhu Plastic or generate 4.72% return on investment over 90 days.

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

Cangzhou Mingzhu Plastic  vs.  ZYF Lopsking Aluminum

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cangzhou Mingzhu Plastic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cangzhou Mingzhu sustained solid returns over the last few months and may actually be approaching a breakup point.

ZYF Lopsking Aluminum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZYF Lopsking Aluminum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZYF Lopsking sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cangzhou Mingzhu and ZYF Lopsking

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

The idea behind Cangzhou Mingzhu Plastic and ZYF Lopsking Aluminum 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.