Correlation Between Xizi Clean and Zhengzhou Coal

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

By analyzing existing cross correlation between Xizi Clean Energy and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Xizi Clean and Zhengzhou Coal 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 Xizi Clean with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xizi Clean and Zhengzhou Coal.

Diversification Opportunities for Xizi Clean and Zhengzhou Coal

0.63

Correlation Coefficient

Xizi Clean  Zhengzhou Coal

Poor diversification

The 3 months correlation between Xizi and Zhengzhou is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xizi Clean Energy and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Xizi Clean 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 Xizi Clean Energy are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Xizi Clean i.e., Xizi Clean and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Xizi Clean and Zhengzhou Coal

Assuming the 90 days trading horizon Xizi Clean Energy is expected to generate 1.22 times more return on investment than Zhengzhou Coal. However, Xizi Clean is 1.22 times more volatile than Zhengzhou Coal Mining. It trades about 0.14 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.13 per unit of risk. If you would invest  1,149  in Xizi Clean Energy on December 26, 2024 and sell it today you would earn a total of  230.00  from holding Xizi Clean Energy or generate 20.02% return on investment over 90 days.

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

Xizi Clean Energy  vs.  Zhengzhou Coal Mining

Xizi Clean Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhengzhou Coal Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhengzhou Coal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xizi Clean and Zhengzhou Coal

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

The idea behind Xizi Clean Energy and Zhengzhou Coal Mining 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.