Correlation Between Zhongshan Broad and Biwin Storage

Can any of the company-specific risk be diversified away by investing in both Zhongshan Broad and Biwin Storage 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 and Biwin Storage 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 Biwin Storage Technology, you can compare the effects of market volatilities on Zhongshan Broad and Biwin Storage 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 with a short position of Biwin Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad and Biwin Storage.

Diversification Opportunities for Zhongshan Broad and Biwin Storage

0.02

Correlation Coefficient

Zhongshan Broad  Biwin Storage

Significant diversification

The 3 months correlation between Zhongshan and Biwin is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology and Zhongshan Broad 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 Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Zhongshan Broad i.e., Zhongshan Broad and Biwin Storage go up and down completely randomly.

Pair Corralation between Zhongshan Broad and Biwin Storage

Assuming the 90 days trading horizon Zhongshan Broad Ocean Motor is expected to under-perform the Biwin Storage. But the stock apears to be less risky and, when comparing its historical volatility, Zhongshan Broad Ocean Motor is 1.33 times less risky than Biwin Storage. The stock trades about -0.05 of its potential returns per unit of risk. The Biwin Storage Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,883  in Biwin Storage Technology on October 11, 2024 and sell it today you would earn a total of  16.00  from holding Biwin Storage Technology or generate 0.27% return on investment over 90 days.

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

Zhongshan Broad Ocean Motor  vs.  Biwin Storage Technology

Zhongshan Broad Ocean

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biwin Storage Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Biwin Storage 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 and Biwin Storage

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

The idea behind Zhongshan Broad Ocean Motor and Biwin Storage Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.