Correlation Between Zig Sheng and Eclat Textile

Can any of the company-specific risk be diversified away by investing in both Zig Sheng and Eclat Textile 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 Eclat Textile 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 Eclat Textile Co, you can compare the effects of market volatilities on Zig Sheng and Eclat Textile 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 Eclat Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zig Sheng and Eclat Textile.

Diversification Opportunities for Zig Sheng and Eclat Textile

0.6

Correlation Coefficient

Zig Sheng  Eclat Textile

Poor diversification

The 3 months correlation between Zig and Eclat is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zig Sheng Industrial and Eclat Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclat Textile 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 Eclat Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclat Textile has no effect on the direction of Zig Sheng i.e., Zig Sheng and Eclat Textile go up and down completely randomly.

Pair Corralation between Zig Sheng and Eclat Textile

Assuming the 90 days trading horizon Zig Sheng Industrial is expected to under-perform the Eclat Textile. But the stock apears to be less risky and, when comparing its historical volatility, Zig Sheng Industrial is 1.48 times less risky than Eclat Textile. The stock trades about -0.17 of its potential returns per unit of risk. The Eclat Textile Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  54,500  in Eclat Textile Co on October 7, 2024 and sell it today you would lose (3,900) from holding Eclat Textile Co or give up 7.16% of portfolio value over 90 days.

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

Zig Sheng Industrial  vs.  Eclat Textile Co

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Eclat Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eclat Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Zig Sheng and Eclat Textile

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

The idea behind Zig Sheng Industrial and Eclat Textile Co 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.