Correlation Between Shenzhen Zhongzhuang and Qijing Machinery

Can any of the company-specific risk be diversified away by investing in both Shenzhen Zhongzhuang and Qijing Machinery 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 Shenzhen Zhongzhuang and Qijing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Zhongzhuang Construction and Qijing Machinery, you can compare the effects of market volatilities on Shenzhen Zhongzhuang and Qijing Machinery 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 Shenzhen Zhongzhuang with a short position of Qijing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Zhongzhuang and Qijing Machinery.

Diversification Opportunities for Shenzhen Zhongzhuang and Qijing Machinery

0.39

Correlation Coefficient

Shenzhen Zhongzhuang  Qijing Machinery

Weak diversification

The 3 months correlation between Shenzhen and Qijing is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery and Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction are associated (or correlated) with Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Qijing Machinery go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Qijing Machinery

Assuming the 90 days trading horizon Shenzhen Zhongzhuang Construction is expected to under-perform the Qijing Machinery. In addition to that, Shenzhen Zhongzhuang is 1.01 times more volatile than Qijing Machinery. It trades about -0.22 of its total potential returns per unit of risk. Qijing Machinery is currently generating about 0.18 per unit of volatility. If you would invest  1,290  in Qijing Machinery on October 22, 2024 and sell it today you would earn a total of  166.00  from holding Qijing Machinery or generate 12.87% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Qijing Machinery

Shenzhen Zhongzhuang

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Qijing Machinery

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Zhongzhuang and Qijing Machinery

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

The idea behind Shenzhen Zhongzhuang Construction and Qijing Machinery 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.