Correlation Between Hangzhou Weiguang and Ziel Home

Can any of the company-specific risk be diversified away by investing in both Hangzhou Weiguang and Ziel Home 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 Hangzhou Weiguang and Ziel Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hangzhou Weiguang Electronic and Ziel Home Furnishing, you can compare the effects of market volatilities on Hangzhou Weiguang and Ziel Home 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 Hangzhou Weiguang with a short position of Ziel Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Weiguang and Ziel Home.

Diversification Opportunities for Hangzhou Weiguang and Ziel Home

0.87

Correlation Coefficient

Hangzhou Weiguang  Ziel Home

Very poor diversification

The 3 months correlation between Hangzhou and Ziel is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Weiguang Electronic and Ziel Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ziel Home Furnishing and Hangzhou Weiguang 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 Hangzhou Weiguang Electronic are associated (or correlated) with Ziel Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ziel Home Furnishing has no effect on the direction of Hangzhou Weiguang i.e., Hangzhou Weiguang and Ziel Home go up and down completely randomly.

Pair Corralation between Hangzhou Weiguang and Ziel Home

Assuming the 90 days trading horizon Hangzhou Weiguang Electronic is expected to generate 0.71 times more return on investment than Ziel Home. However, Hangzhou Weiguang Electronic is 1.41 times less risky than Ziel Home. It trades about 0.15 of its potential returns per unit of risk. Ziel Home Furnishing is currently generating about 0.05 per unit of risk. If you would invest  1,998  in Hangzhou Weiguang Electronic on September 27, 2024 and sell it today you would earn a total of  477.00  from holding Hangzhou Weiguang Electronic or generate 23.87% return on investment over 90 days.

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

Hangzhou Weiguang Electronic  vs.  Ziel Home Furnishing

Hangzhou Weiguang

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Weiguang Electronic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Weiguang sustained solid returns over the last few months and may actually be approaching a breakup point.

Ziel Home Furnishing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ziel Home Furnishing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ziel Home may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hangzhou Weiguang and Ziel Home

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

The idea behind Hangzhou Weiguang Electronic and Ziel Home Furnishing 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.