Correlation Between Zhejiang Construction and Bengang Steel

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

By analyzing existing cross correlation between Zhejiang Construction Investment and Bengang Steel Plates, you can compare the effects of market volatilities on Zhejiang Construction and Bengang Steel 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 Construction with a short position of Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Construction and Bengang Steel.

Diversification Opportunities for Zhejiang Construction and Bengang Steel

0.7

Correlation Coefficient

Zhejiang Construction  Bengang Steel

Poor diversification

The 3 months correlation between Zhejiang and Bengang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and Zhejiang Construction 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 Construction Investment are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and Bengang Steel go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Bengang Steel

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to generate 2.33 times more return on investment than Bengang Steel. However, Zhejiang Construction is 2.33 times more volatile than Bengang Steel Plates. It trades about 0.04 of its potential returns per unit of risk. Bengang Steel Plates is currently generating about 0.06 per unit of risk. If you would invest  948.00  in Zhejiang Construction Investment on September 19, 2024 and sell it today you would earn a total of  20.00  from holding Zhejiang Construction Investment or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Zhejiang Construction Investme  vs.  Bengang Steel Plates

Zhejiang Construction

Risk-Adjusted Performance

10 of 100

OK

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

Bengang Steel Plates

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Construction and Bengang Steel

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

The idea behind Zhejiang Construction Investment and Bengang Steel Plates 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.