Correlation Between Zig Sheng and Hong Yi

Can any of the company-specific risk be diversified away by investing in both Zig Sheng and Hong Yi 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 Zig Sheng and Hong Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zig Sheng Industrial and Hong Yi Fiber, you can compare the effects of market volatilities on Zig Sheng and Hong Yi 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 Zig Sheng with a short position of Hong Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zig Sheng and Hong Yi.

Diversification Opportunities for Zig Sheng and Hong Yi

0.87

Correlation Coefficient

Zig Sheng  Hong Yi

Very poor diversification

The 3 months correlation between Zig and Hong is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Zig Sheng Industrial and Hong Yi Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Yi Fiber and Zig Sheng 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 Zig Sheng Industrial are associated (or correlated) with Hong Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Yi Fiber has no effect on the direction of Zig Sheng i.e., Zig Sheng and Hong Yi go up and down completely randomly.

Pair Corralation between Zig Sheng and Hong Yi

Assuming the 90 days trading horizon Zig Sheng Industrial is expected to under-perform the Hong Yi. In addition to that, Zig Sheng is 1.58 times more volatile than Hong Yi Fiber. It trades about -0.22 of its total potential returns per unit of risk. Hong Yi Fiber is currently generating about -0.13 per unit of volatility. If you would invest  1,690  in Hong Yi Fiber on September 16, 2024 and sell it today you would lose (100.00) from holding Hong Yi Fiber or give up 5.92% of portfolio value over 90 days.

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

Zig Sheng Industrial  vs.  Hong Yi Fiber

Zig Sheng Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zig Sheng Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hong Yi Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Yi Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hong Yi is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Zig Sheng and Hong Yi

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

The idea behind Zig Sheng Industrial and Hong Yi Fiber 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.