Correlation Between Chongqing Shunbo and Ziel Home

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

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

Diversification Opportunities for Chongqing Shunbo and Ziel Home

0.61

Correlation Coefficient

Chongqing Shunbo  Ziel Home

Poor diversification

The 3 months correlation between Chongqing and Ziel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Shunbo Aluminum 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 Chongqing Shunbo 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 Chongqing Shunbo Aluminum 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 Chongqing Shunbo i.e., Chongqing Shunbo and Ziel Home go up and down completely randomly.

Pair Corralation between Chongqing Shunbo and Ziel Home

Assuming the 90 days trading horizon Chongqing Shunbo Aluminum is expected to generate 0.85 times more return on investment than Ziel Home. However, Chongqing Shunbo Aluminum is 1.17 times less risky than Ziel Home. It trades about 0.04 of its potential returns per unit of risk. Ziel Home Furnishing is currently generating about -0.02 per unit of risk. If you would invest  672.00  in Chongqing Shunbo Aluminum on December 25, 2024 and sell it today you would earn a total of  18.00  from holding Chongqing Shunbo Aluminum or generate 2.68% return on investment over 90 days.

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

Chongqing Shunbo Aluminum  vs.  Ziel Home Furnishing

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Shunbo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ziel Home Furnishing

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chongqing Shunbo and Ziel Home

The main advantage of trading using opposite Chongqing Shunbo and Ziel Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Shunbo 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 Chongqing Shunbo Aluminum 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.