Correlation Between Zhongshan Broad-Ocean and Jiangsu Broadcasting

Can any of the company-specific risk be diversified away by investing in both Zhongshan Broad-Ocean and Jiangsu Broadcasting 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 Zhongshan Broad-Ocean and Jiangsu Broadcasting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongshan Broad Ocean Motor and Jiangsu Broadcasting Cable, you can compare the effects of market volatilities on Zhongshan Broad-Ocean and Jiangsu Broadcasting 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 Zhongshan Broad-Ocean with a short position of Jiangsu Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad-Ocean and Jiangsu Broadcasting.

Diversification Opportunities for Zhongshan Broad-Ocean and Jiangsu Broadcasting

0.22

Correlation Coefficient

Zhongshan Broad-Ocean  Jiangsu Broadcasting

Modest diversification

The 3 months correlation between Zhongshan and Jiangsu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Jiangsu Broadcasting Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Broadcasting and Zhongshan Broad-Ocean 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 Zhongshan Broad Ocean Motor are associated (or correlated) with Jiangsu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Broadcasting has no effect on the direction of Zhongshan Broad-Ocean i.e., Zhongshan Broad-Ocean and Jiangsu Broadcasting go up and down completely randomly.

Pair Corralation between Zhongshan Broad-Ocean and Jiangsu Broadcasting

Assuming the 90 days trading horizon Zhongshan Broad Ocean Motor is expected to generate 1.42 times more return on investment than Jiangsu Broadcasting. However, Zhongshan Broad-Ocean is 1.42 times more volatile than Jiangsu Broadcasting Cable. It trades about 0.14 of its potential returns per unit of risk. Jiangsu Broadcasting Cable is currently generating about 0.0 per unit of risk. If you would invest  606.00  in Zhongshan Broad Ocean Motor on December 27, 2024 and sell it today you would earn a total of  144.00  from holding Zhongshan Broad Ocean Motor or generate 23.76% return on investment over 90 days.

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

Zhongshan Broad Ocean Motor  vs.  Jiangsu Broadcasting Cable

Zhongshan Broad Ocean

Risk-Adjusted Performance

Good

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

Jiangsu Broadcasting

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhongshan Broad-Ocean and Jiangsu Broadcasting

The main advantage of trading using opposite Zhongshan Broad-Ocean and Jiangsu Broadcasting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongshan Broad-Ocean position performs unexpectedly, Jiangsu Broadcasting 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 Jiangsu Broadcasting will offset losses from the drop in Jiangsu Broadcasting's long position.

The idea behind Zhongshan Broad Ocean Motor and Jiangsu Broadcasting Cable 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.