Correlation Between Zhejiang Construction and Marssenger Kitchenware

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

Diversification Opportunities for Zhejiang Construction and Marssenger Kitchenware

0.64

Correlation Coefficient

Zhejiang Construction  Marssenger Kitchenware

Poor diversification

The 3 months correlation between Zhejiang and Marssenger is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and Marssenger Kitchenware Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marssenger Kitchenware 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 Marssenger Kitchenware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marssenger Kitchenware has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and Marssenger Kitchenware go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Marssenger Kitchenware

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the Marssenger Kitchenware. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Construction Investment is 1.21 times less risky than Marssenger Kitchenware. The stock trades about -0.04 of its potential returns per unit of risk. The Marssenger Kitchenware Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,388  in Marssenger Kitchenware Co on September 20, 2024 and sell it today you would lose (901.00) from holding Marssenger Kitchenware Co or give up 37.73% of portfolio value over 90 days.

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

Zhejiang Construction Investme  vs.  Marssenger Kitchenware Co

Zhejiang Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Construction Investment are ranked lower than 9 (%) 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.

Marssenger Kitchenware

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Zhejiang Construction and Marssenger Kitchenware

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

The idea behind Zhejiang Construction Investment and Marssenger Kitchenware Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.