Correlation Between Zhejiang Construction and Peoples Insurance

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

Diversification Opportunities for Zhejiang Construction and Peoples Insurance

0.64

Correlation Coefficient

Zhejiang Construction  Peoples Insurance

Poor diversification

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

Pair Corralation between Zhejiang Construction and Peoples Insurance

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the Peoples Insurance. In addition to that, Zhejiang Construction is 2.43 times more volatile than Peoples Insurance of. It trades about -0.35 of its total potential returns per unit of risk. Peoples Insurance of is currently generating about 0.15 per unit of volatility. If you would invest  701.00  in Peoples Insurance of on September 23, 2024 and sell it today you would earn a total of  31.00  from holding Peoples Insurance of or generate 4.42% return on investment over 90 days.

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

Zhejiang Construction Investme  vs.  Peoples Insurance of

Zhejiang Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Construction Investment are ranked lower than 8 (%) 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.

Peoples Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Insurance of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peoples Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Construction and Peoples Insurance

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

The idea behind Zhejiang Construction Investment and Peoples Insurance of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.