Correlation Between Zhejiang Zanyu and Shandong Gold

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

By analyzing existing cross correlation between Zhejiang Zanyu Technology and Shandong Gold Mining, you can compare the effects of market volatilities on Zhejiang Zanyu and Shandong Gold 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 Zanyu with a short position of Shandong Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Zanyu and Shandong Gold.

Diversification Opportunities for Zhejiang Zanyu and Shandong Gold

-0.28

Correlation Coefficient

Zhejiang Zanyu  Shandong Gold

Very good diversification

The 3 months correlation between Zhejiang and Shandong is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Zanyu Technology and Shandong Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Gold Mining and Zhejiang Zanyu 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 Zanyu Technology are associated (or correlated) with Shandong Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Gold Mining has no effect on the direction of Zhejiang Zanyu i.e., Zhejiang Zanyu and Shandong Gold go up and down completely randomly.

Pair Corralation between Zhejiang Zanyu and Shandong Gold

Assuming the 90 days trading horizon Zhejiang Zanyu is expected to generate 13.5 times less return on investment than Shandong Gold. But when comparing it to its historical volatility, Zhejiang Zanyu Technology is 1.02 times less risky than Shandong Gold. It trades about 0.01 of its potential returns per unit of risk. Shandong Gold Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,316  in Shandong Gold Mining on December 27, 2024 and sell it today you would earn a total of  280.00  from holding Shandong Gold Mining or generate 12.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Zhejiang Zanyu Technology  vs.  Shandong Gold Mining

Zhejiang Zanyu Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhejiang Zanyu Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Zanyu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shandong Gold Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Gold Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Zanyu and Shandong Gold

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

The idea behind Zhejiang Zanyu Technology and Shandong Gold 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.