Correlation Between Shenzhen Noposion and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both Shenzhen Noposion and Zhengzhou Coal 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 Shenzhen Noposion and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Noposion Agrochemicals and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Shenzhen Noposion and Zhengzhou Coal 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 Shenzhen Noposion with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Noposion and Zhengzhou Coal.

Diversification Opportunities for Shenzhen Noposion and Zhengzhou Coal

-0.34

Correlation Coefficient

Shenzhen Noposion  Zhengzhou Coal

Very good diversification

The 3 months correlation between Shenzhen and Zhengzhou is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Noposion Agrochemical and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Shenzhen Noposion 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 Shenzhen Noposion Agrochemicals are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Shenzhen Noposion i.e., Shenzhen Noposion and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Shenzhen Noposion and Zhengzhou Coal

Assuming the 90 days trading horizon Shenzhen Noposion Agrochemicals is expected to under-perform the Zhengzhou Coal. In addition to that, Shenzhen Noposion is 1.2 times more volatile than Zhengzhou Coal Mining. It trades about -0.12 of its total potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.14 per unit of volatility. If you would invest  1,318  in Zhengzhou Coal Mining on December 28, 2024 and sell it today you would earn a total of  217.00  from holding Zhengzhou Coal Mining or generate 16.46% return on investment over 90 days.

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

Shenzhen Noposion Agrochemical  vs.  Zhengzhou Coal Mining

Shenzhen Noposion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Noposion Agrochemicals 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.

Zhengzhou Coal Mining

Risk-Adjusted Performance

Good

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

Pair Trading with Shenzhen Noposion and Zhengzhou Coal

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

The idea behind Shenzhen Noposion Agrochemicals and Zhengzhou Coal Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.