Correlation Between Guangzhou KingTeller and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both Guangzhou KingTeller and Zoomlion Heavy 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 Guangzhou KingTeller and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou KingTeller Technology and Zoomlion Heavy Industry, you can compare the effects of market volatilities on Guangzhou KingTeller and Zoomlion Heavy 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 Guangzhou KingTeller with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou KingTeller and Zoomlion Heavy.

Diversification Opportunities for Guangzhou KingTeller and Zoomlion Heavy

0.27

Correlation Coefficient

Guangzhou KingTeller  Zoomlion Heavy

Modest diversification

The 3 months correlation between Guangzhou and Zoomlion is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou KingTeller Technolog and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and Guangzhou KingTeller 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 Guangzhou KingTeller Technology are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of Guangzhou KingTeller i.e., Guangzhou KingTeller and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between Guangzhou KingTeller and Zoomlion Heavy

Assuming the 90 days trading horizon Guangzhou KingTeller Technology is expected to generate 2.29 times more return on investment than Zoomlion Heavy. However, Guangzhou KingTeller is 2.29 times more volatile than Zoomlion Heavy Industry. It trades about -0.02 of its potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about -0.06 per unit of risk. If you would invest  480.00  in Guangzhou KingTeller Technology on October 8, 2024 and sell it today you would lose (60.00) from holding Guangzhou KingTeller Technology or give up 12.5% of portfolio value over 90 days.

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

Guangzhou KingTeller Technolog  vs.  Zoomlion Heavy Industry

Guangzhou KingTeller

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zoomlion Heavy Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoomlion Heavy Industry 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.

Pair Trading with Guangzhou KingTeller and Zoomlion Heavy

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

The idea behind Guangzhou KingTeller Technology and Zoomlion Heavy Industry 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.