Correlation Between Zhejiang Construction and GRG Banking

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

Diversification Opportunities for Zhejiang Construction and GRG Banking

0.74

Correlation Coefficient

Zhejiang Construction  GRG Banking

Poor diversification

The 3 months correlation between Zhejiang and GRG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and GRG Banking Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRG Banking Equipment 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 GRG Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRG Banking Equipment has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and GRG Banking go up and down completely randomly.

Pair Corralation between Zhejiang Construction and GRG Banking

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the GRG Banking. In addition to that, Zhejiang Construction is 1.27 times more volatile than GRG Banking Equipment. It trades about -0.05 of its total potential returns per unit of risk. GRG Banking Equipment is currently generating about 0.03 per unit of volatility. If you would invest  968.00  in GRG Banking Equipment on September 28, 2024 and sell it today you would earn a total of  254.00  from holding GRG Banking Equipment or generate 26.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Zhejiang Construction Investme  vs.  GRG Banking Equipment

Zhejiang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

GRG Banking Equipment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GRG Banking Equipment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRG Banking may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhejiang Construction and GRG Banking

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

The idea behind Zhejiang Construction Investment and GRG Banking Equipment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.