Correlation Between New Hope and Zhangjiagang Elegant

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

Diversification Opportunities for New Hope and Zhangjiagang Elegant

-0.22

Correlation Coefficient

New Hope  Zhangjiagang Elegant

Very good diversification

The 3 months correlation between New and Zhangjiagang is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy and Zhangjiagang Elegant Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Elegant Home 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 Zhangjiagang Elegant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Elegant Home has no effect on the direction of New Hope i.e., New Hope and Zhangjiagang Elegant go up and down completely randomly.

Pair Corralation between New Hope and Zhangjiagang Elegant

Assuming the 90 days trading horizon New Hope is expected to generate 1.02 times less return on investment than Zhangjiagang Elegant. But when comparing it to its historical volatility, New Hope Dairy is 1.19 times less risky than Zhangjiagang Elegant. It trades about 0.03 of its potential returns per unit of risk. Zhangjiagang Elegant Home is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Zhangjiagang Elegant Home on October 23, 2024 and sell it today you would earn a total of  109.00  from holding Zhangjiagang Elegant Home or generate 12.93% 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.  Zhangjiagang Elegant Home

New Hope Dairy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 12 (%) 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.

Zhangjiagang Elegant Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhangjiagang Elegant Home has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhangjiagang Elegant is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New Hope and Zhangjiagang Elegant

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

The idea behind New Hope Dairy and Zhangjiagang Elegant Home 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..