Correlation Between New Hope and Zhuzhou Kibing

Can any of the company-specific risk be diversified away by investing in both New Hope and Zhuzhou Kibing 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 New Hope and Zhuzhou Kibing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Hope Dairy and Zhuzhou Kibing Group, you can compare the effects of market volatilities on New Hope and Zhuzhou Kibing 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 New Hope with a short position of Zhuzhou Kibing. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Hope and Zhuzhou Kibing.

Diversification Opportunities for New Hope and Zhuzhou Kibing

-0.08

Correlation Coefficient

New Hope  Zhuzhou Kibing

Good diversification

The 3 months correlation between New and Zhuzhou is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy and Zhuzhou Kibing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhuzhou Kibing Group and New Hope 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 New Hope Dairy are associated (or correlated) with Zhuzhou Kibing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhuzhou Kibing Group has no effect on the direction of New Hope i.e., New Hope and Zhuzhou Kibing go up and down completely randomly.

Pair Corralation between New Hope and Zhuzhou Kibing

Assuming the 90 days trading horizon New Hope Dairy is expected to generate 1.19 times more return on investment than Zhuzhou Kibing. However, New Hope is 1.19 times more volatile than Zhuzhou Kibing Group. It trades about 0.11 of its potential returns per unit of risk. Zhuzhou Kibing Group is currently generating about -0.1 per unit of risk. If you would invest  1,233  in New Hope Dairy on October 8, 2024 and sell it today you would earn a total of  277.00  from holding New Hope Dairy or generate 22.47% return on investment over 90 days.

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

New Hope Dairy  vs.  Zhuzhou Kibing Group

New Hope Dairy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Hope sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhuzhou Kibing Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhuzhou Kibing Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with New Hope and Zhuzhou Kibing

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

The idea behind New Hope Dairy and Zhuzhou Kibing Group 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.