Correlation Between Changchun and Zhejiang Xiantong

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

By analyzing existing cross correlation between Changchun UP Optotech and Zhejiang Xiantong RubberPlastic, you can compare the effects of market volatilities on Changchun and Zhejiang Xiantong 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 Changchun with a short position of Zhejiang Xiantong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and Zhejiang Xiantong.

Diversification Opportunities for Changchun and Zhejiang Xiantong

0.02

Correlation Coefficient

Changchun  Zhejiang Xiantong

Significant diversification

The 3 months correlation between Changchun and Zhejiang is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and Zhejiang Xiantong RubberPlasti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Xiantong and Changchun 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 Changchun UP Optotech are associated (or correlated) with Zhejiang Xiantong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Xiantong has no effect on the direction of Changchun i.e., Changchun and Zhejiang Xiantong go up and down completely randomly.

Pair Corralation between Changchun and Zhejiang Xiantong

Assuming the 90 days trading horizon Changchun UP Optotech is not expected to generate positive returns. Moreover, Changchun is 1.78 times more volatile than Zhejiang Xiantong RubberPlastic. It trades away all of its potential returns to assume current level of volatility. Zhejiang Xiantong RubberPlastic is currently generating about 0.0 per unit of risk. If you would invest  1,357  in Zhejiang Xiantong RubberPlastic on October 22, 2024 and sell it today you would lose (1.00) from holding Zhejiang Xiantong RubberPlastic or give up 0.07% of portfolio value over 90 days.

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

Changchun UP Optotech  vs.  Zhejiang Xiantong RubberPlasti

Changchun UP Optotech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhejiang Xiantong

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Xiantong RubberPlastic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Xiantong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Changchun and Zhejiang Xiantong

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

The idea behind Changchun UP Optotech and Zhejiang Xiantong RubberPlastic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.