Correlation Between Zhejiang Construction and Qiaoyin Environmental

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

Diversification Opportunities for Zhejiang Construction and Qiaoyin Environmental

0.58

Correlation Coefficient

Zhejiang Construction  Qiaoyin Environmental

Very weak diversification

The 3 months correlation between Zhejiang and Qiaoyin is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and Qiaoyin Environmental Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qiaoyin Environmental 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 Qiaoyin Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qiaoyin Environmental has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and Qiaoyin Environmental go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Qiaoyin Environmental

Assuming the 90 days trading horizon Zhejiang Construction is expected to generate 1.15 times less return on investment than Qiaoyin Environmental. In addition to that, Zhejiang Construction is 1.3 times more volatile than Qiaoyin Environmental Tech. It trades about 0.13 of its total potential returns per unit of risk. Qiaoyin Environmental Tech is currently generating about 0.2 per unit of volatility. If you would invest  783.00  in Qiaoyin Environmental Tech on September 19, 2024 and sell it today you would earn a total of  308.00  from holding Qiaoyin Environmental Tech or generate 39.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Zhejiang Construction Investme  vs.  Qiaoyin Environmental Tech

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.

Qiaoyin Environmental

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qiaoyin Environmental Tech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qiaoyin Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Construction and Qiaoyin Environmental

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

The idea behind Zhejiang Construction Investment and Qiaoyin Environmental Tech 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.