Correlation Between ZYF Lopsking and China Railway

Can any of the company-specific risk be diversified away by investing in both ZYF Lopsking and China Railway 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 ZYF Lopsking and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZYF Lopsking Aluminum and China Railway Construction, you can compare the effects of market volatilities on ZYF Lopsking and China Railway 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 ZYF Lopsking with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZYF Lopsking and China Railway.

Diversification Opportunities for ZYF Lopsking and China Railway

0.68

Correlation Coefficient

ZYF Lopsking  China Railway

Poor diversification

The 3 months correlation between ZYF and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ZYF Lopsking Aluminum and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and ZYF Lopsking 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 ZYF Lopsking Aluminum are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of ZYF Lopsking i.e., ZYF Lopsking and China Railway go up and down completely randomly.

Pair Corralation between ZYF Lopsking and China Railway

Assuming the 90 days trading horizon ZYF Lopsking Aluminum is expected to generate 1.7 times more return on investment than China Railway. However, ZYF Lopsking is 1.7 times more volatile than China Railway Construction. It trades about -0.26 of its potential returns per unit of risk. China Railway Construction is currently generating about -0.53 per unit of risk. If you would invest  590.00  in ZYF Lopsking Aluminum on October 11, 2024 and sell it today you would lose (70.00) from holding ZYF Lopsking Aluminum or give up 11.86% of portfolio value over 90 days.

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

ZYF Lopsking Aluminum  vs.  China Railway Construction

ZYF Lopsking Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Railway Constr

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ZYF Lopsking and China Railway

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

The idea behind ZYF Lopsking Aluminum and China Railway Construction 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.