Correlation Between ZhongAn Online and Chesapeake Utilities

Can any of the company-specific risk be diversified away by investing in both ZhongAn Online and Chesapeake Utilities 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 ZhongAn Online and Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZhongAn Online P and Chesapeake Utilities, you can compare the effects of market volatilities on ZhongAn Online and Chesapeake Utilities 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 ZhongAn Online with a short position of Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and Chesapeake Utilities.

Diversification Opportunities for ZhongAn Online and Chesapeake Utilities

0.15

Correlation Coefficient

ZhongAn Online  Chesapeake Utilities

Average diversification

The 3 months correlation between ZhongAn and Chesapeake is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and ZhongAn Online 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 ZhongAn Online P are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between ZhongAn Online and Chesapeake Utilities

Assuming the 90 days trading horizon ZhongAn Online P is expected to generate 3.23 times more return on investment than Chesapeake Utilities. However, ZhongAn Online is 3.23 times more volatile than Chesapeake Utilities. It trades about 0.06 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.0 per unit of risk. If you would invest  143.00  in ZhongAn Online P on December 23, 2024 and sell it today you would earn a total of  14.00  from holding ZhongAn Online P or generate 9.79% return on investment over 90 days.

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

ZhongAn Online P  vs.  Chesapeake Utilities

ZhongAn Online P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZhongAn Online P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ZhongAn Online unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chesapeake Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chesapeake Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ZhongAn Online and Chesapeake Utilities

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

The idea behind ZhongAn Online P and Chesapeake Utilities 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.