Correlation Between Zhejiang Construction and AVIC UAS

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

Diversification Opportunities for Zhejiang Construction and AVIC UAS

0.56

Correlation Coefficient

Zhejiang Construction  AVIC UAS

Very weak diversification

The 3 months correlation between Zhejiang and AVIC is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Construction Investme and AVIC UAS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIC UAS 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 AVIC UAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIC UAS has no effect on the direction of Zhejiang Construction i.e., Zhejiang Construction and AVIC UAS go up and down completely randomly.

Pair Corralation between Zhejiang Construction and AVIC UAS

Assuming the 90 days trading horizon Zhejiang Construction Investment is expected to under-perform the AVIC UAS. In addition to that, Zhejiang Construction is 1.86 times more volatile than AVIC UAS Co. It trades about -0.05 of its total potential returns per unit of risk. AVIC UAS Co is currently generating about -0.09 per unit of volatility. If you would invest  4,402  in AVIC UAS Co on September 20, 2024 and sell it today you would lose (258.00) from holding AVIC UAS Co or give up 5.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

Zhejiang Construction Investme  vs.  AVIC UAS 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.

AVIC UAS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC UAS Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC UAS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Construction and AVIC UAS

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

The idea behind Zhejiang Construction Investment and AVIC UAS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.