Correlation Between Zhejiang Kingland and Shandong Hongchuang

Can any of the company-specific risk be diversified away by investing in both Zhejiang Kingland and Shandong Hongchuang 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 Shandong Hongchuang 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 Shandong Hongchuang Aluminum, you can compare the effects of market volatilities on Zhejiang Kingland and Shandong Hongchuang 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 Shandong Hongchuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Kingland and Shandong Hongchuang.

Diversification Opportunities for Zhejiang Kingland and Shandong Hongchuang

-0.55

Correlation Coefficient

Zhejiang Kingland  Shandong Hongchuang

Excellent diversification

The 3 months correlation between Zhejiang and Shandong is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Kingland Pipeline and Shandong Hongchuang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hongchuang 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 Shandong Hongchuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hongchuang has no effect on the direction of Zhejiang Kingland i.e., Zhejiang Kingland and Shandong Hongchuang go up and down completely randomly.

Pair Corralation between Zhejiang Kingland and Shandong Hongchuang

Assuming the 90 days trading horizon Zhejiang Kingland Pipeline is expected to under-perform the Shandong Hongchuang. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Kingland Pipeline is 1.64 times less risky than Shandong Hongchuang. The stock trades about -0.13 of its potential returns per unit of risk. The Shandong Hongchuang Aluminum is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  574.00  in Shandong Hongchuang Aluminum on October 9, 2024 and sell it today you would earn a total of  413.00  from holding Shandong Hongchuang Aluminum or generate 71.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Zhejiang Kingland Pipeline  vs.  Shandong Hongchuang Aluminum

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Hongchuang

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Hongchuang Aluminum are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Hongchuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Kingland and Shandong Hongchuang

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

The idea behind Zhejiang Kingland Pipeline and Shandong Hongchuang Aluminum 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.