Correlation Between Zhejiang Kingland and Lao Feng

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

Diversification Opportunities for Zhejiang Kingland and Lao Feng

0.6

Correlation Coefficient

Zhejiang Kingland  Lao Feng

Poor diversification

The 3 months correlation between Zhejiang and Lao is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Kingland Pipeline and Lao Feng Xiang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lao Feng Xiang 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 Lao Feng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lao Feng Xiang has no effect on the direction of Zhejiang Kingland i.e., Zhejiang Kingland and Lao Feng go up and down completely randomly.

Pair Corralation between Zhejiang Kingland and Lao Feng

Assuming the 90 days trading horizon Zhejiang Kingland is expected to generate 1.17 times less return on investment than Lao Feng. But when comparing it to its historical volatility, Zhejiang Kingland Pipeline is 2.14 times less risky than Lao Feng. It trades about 0.06 of its potential returns per unit of risk. Lao Feng Xiang is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,086  in Lao Feng Xiang on December 24, 2024 and sell it today you would earn a total of  139.00  from holding Lao Feng Xiang or generate 2.73% return on investment over 90 days.

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

Zhejiang Kingland Pipeline  vs.  Lao Feng Xiang

Zhejiang Kingland

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Kingland Pipeline are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Kingland is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lao Feng Xiang

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lao Feng Xiang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lao Feng is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Kingland and Lao Feng

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

The idea behind Zhejiang Kingland Pipeline and Lao Feng Xiang 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.