Correlation Between Sichuan Jinshi and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both Sichuan Jinshi and Zoomlion Heavy 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 Sichuan Jinshi and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Jinshi Technology and Zoomlion Heavy Industry, you can compare the effects of market volatilities on Sichuan Jinshi and Zoomlion Heavy 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 Sichuan Jinshi with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Jinshi and Zoomlion Heavy.

Diversification Opportunities for Sichuan Jinshi and Zoomlion Heavy

0.52

Correlation Coefficient

Sichuan Jinshi  Zoomlion Heavy

Very weak diversification

The 3 months correlation between Sichuan and Zoomlion is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and Sichuan Jinshi 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 Sichuan Jinshi Technology are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of Sichuan Jinshi i.e., Sichuan Jinshi and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Zoomlion Heavy

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to generate 1.86 times more return on investment than Zoomlion Heavy. However, Sichuan Jinshi is 1.86 times more volatile than Zoomlion Heavy Industry. It trades about 0.11 of its potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about -0.05 per unit of risk. If you would invest  556.00  in Sichuan Jinshi Technology on October 13, 2024 and sell it today you would earn a total of  109.00  from holding Sichuan Jinshi Technology or generate 19.6% return on investment over 90 days.

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

Sichuan Jinshi Technology  vs.  Zoomlion Heavy Industry

Sichuan Jinshi Technology

Risk-Adjusted Performance

8 of 100

OK

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

Zoomlion Heavy Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sichuan Jinshi and Zoomlion Heavy

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

The idea behind Sichuan Jinshi Technology and Zoomlion Heavy Industry 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.