Correlation Between Zhejiang Kingland and Guangzhou Seagull

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

By analyzing existing cross correlation between Zhejiang Kingland Pipeline and Guangzhou Seagull Kitchen, you can compare the effects of market volatilities on Zhejiang Kingland and Guangzhou Seagull 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 Zhejiang Kingland with a short position of Guangzhou Seagull. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Kingland and Guangzhou Seagull.

Diversification Opportunities for Zhejiang Kingland and Guangzhou Seagull

0.76

Correlation Coefficient

Zhejiang Kingland  Guangzhou Seagull

Poor diversification

The 3 months correlation between Zhejiang and Guangzhou is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Kingland Pipeline and Guangzhou Seagull Kitchen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Seagull Kitchen and Zhejiang Kingland 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 Zhejiang Kingland Pipeline are associated (or correlated) with Guangzhou Seagull. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Seagull Kitchen has no effect on the direction of Zhejiang Kingland i.e., Zhejiang Kingland and Guangzhou Seagull go up and down completely randomly.

Pair Corralation between Zhejiang Kingland and Guangzhou Seagull

Assuming the 90 days trading horizon Zhejiang Kingland Pipeline is expected to generate 0.71 times more return on investment than Guangzhou Seagull. However, Zhejiang Kingland Pipeline is 1.4 times less risky than Guangzhou Seagull. It trades about 0.0 of its potential returns per unit of risk. Guangzhou Seagull Kitchen is currently generating about -0.02 per unit of risk. If you would invest  637.00  in Zhejiang Kingland Pipeline on October 26, 2024 and sell it today you would lose (55.00) from holding Zhejiang Kingland Pipeline or give up 8.63% of portfolio value over 90 days.

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

Zhejiang Kingland Pipeline  vs.  Guangzhou Seagull Kitchen

Zhejiang Kingland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Kingland Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Guangzhou Seagull Kitchen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Seagull Kitchen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zhejiang Kingland and Guangzhou Seagull

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

The idea behind Zhejiang Kingland Pipeline and Guangzhou Seagull Kitchen 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.