Correlation Between HeNan Splendor and Zhejiang Orient

Can any of the company-specific risk be diversified away by investing in both HeNan Splendor 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 HeNan Splendor and Zhejiang Orient into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HeNan Splendor Science and Zhejiang Orient Gene, you can compare the effects of market volatilities on HeNan Splendor 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 HeNan Splendor with a short position of Zhejiang Orient. Check out your portfolio center. Please also check ongoing floating volatility patterns of HeNan Splendor and Zhejiang Orient.

Diversification Opportunities for HeNan Splendor and Zhejiang Orient

0.29

Correlation Coefficient

HeNan Splendor  Zhejiang Orient

Modest diversification

The 3 months correlation between HeNan and Zhejiang is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding HeNan Splendor Science 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 HeNan Splendor 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 HeNan Splendor Science 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 HeNan Splendor i.e., HeNan Splendor and Zhejiang Orient go up and down completely randomly.

Pair Corralation between HeNan Splendor and Zhejiang Orient

Assuming the 90 days trading horizon HeNan Splendor Science is expected to generate 2.0 times more return on investment than Zhejiang Orient. However, HeNan Splendor is 2.0 times more volatile than Zhejiang Orient Gene. It trades about 0.02 of its potential returns per unit of risk. Zhejiang Orient Gene is currently generating about -0.14 per unit of risk. If you would invest  1,062  in HeNan Splendor Science on December 2, 2024 and sell it today you would earn a total of  8.00  from holding HeNan Splendor Science or generate 0.75% return on investment over 90 days.

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

HeNan Splendor Science  vs.  Zhejiang Orient Gene

HeNan Splendor Science

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HeNan Splendor 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

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HeNan Splendor and Zhejiang Orient

The main advantage of trading using opposite HeNan Splendor and Zhejiang Orient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeNan Splendor 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 HeNan Splendor Science 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.