Correlation Between Cangzhou Mingzhu and Zhejiang Orient

Can any of the company-specific risk be diversified away by investing in both Cangzhou Mingzhu and Zhejiang Orient 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 Zhejiang Orient 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 Zhejiang Orient Gene, you can compare the effects of market volatilities on Cangzhou Mingzhu and Zhejiang Orient 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 Zhejiang Orient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cangzhou Mingzhu and Zhejiang Orient.

Diversification Opportunities for Cangzhou Mingzhu and Zhejiang Orient

-0.04

Correlation Coefficient

Cangzhou Mingzhu  Zhejiang Orient

Good diversification

The 3 months correlation between Cangzhou and Zhejiang is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cangzhou Mingzhu Plastic and Zhejiang Orient Gene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Orient Gene 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 Zhejiang Orient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Orient Gene has no effect on the direction of Cangzhou Mingzhu i.e., Cangzhou Mingzhu and Zhejiang Orient go up and down completely randomly.

Pair Corralation between Cangzhou Mingzhu and Zhejiang Orient

Assuming the 90 days trading horizon Cangzhou Mingzhu Plastic is expected to under-perform the Zhejiang Orient. But the stock apears to be less risky and, when comparing its historical volatility, Cangzhou Mingzhu Plastic is 1.11 times less risky than Zhejiang Orient. The stock trades about -0.38 of its potential returns per unit of risk. The Zhejiang Orient Gene is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  3,260  in Zhejiang Orient Gene on October 10, 2024 and sell it today you would lose (373.00) from holding Zhejiang Orient Gene or give up 11.44% of portfolio value over 90 days.

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

Cangzhou Mingzhu Plastic  vs.  Zhejiang Orient Gene

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhejiang Orient Gene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Orient Gene 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 Cangzhou Mingzhu and Zhejiang Orient

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

The idea behind Cangzhou Mingzhu Plastic and Zhejiang Orient Gene 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.