Correlation Between Zhejiang Construction and Zhongzhu Medical

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

Diversification Opportunities for Zhejiang Construction and Zhongzhu Medical

0.69

Correlation Coefficient

Zhejiang Construction  Zhongzhu Medical

Poor diversification

The 3 months correlation between Zhejiang and Zhongzhu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and Zhongzhu Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongzhu Medical Holdings 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 Zhongzhu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongzhu Medical Holdings has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and Zhongzhu Medical go up and down completely randomly.

Pair Corralation between Zhejiang Construction and Zhongzhu Medical

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the Zhongzhu Medical. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Construction Investment is 1.29 times less risky than Zhongzhu Medical. The stock trades about -0.37 of its potential returns per unit of risk. The Zhongzhu Medical Holdings is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Zhongzhu Medical Holdings on October 25, 2024 and sell it today you would lose (8.00) from holding Zhongzhu Medical Holdings or give up 5.76% 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.  Zhongzhu Medical Holdings

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.

Zhongzhu Medical Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Zhejiang Construction and Zhongzhu Medical

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

The idea behind Zhejiang Construction Investment and Zhongzhu Medical Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.