Correlation Between ZhongAn Online and Vulcan Materials

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

Diversification Opportunities for ZhongAn Online and Vulcan Materials

-0.56

Correlation Coefficient

ZhongAn Online  Vulcan Materials

Excellent diversification

The 3 months correlation between ZhongAn and Vulcan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and Vulcan Materials go up and down completely randomly.

Pair Corralation between ZhongAn Online and Vulcan Materials

Assuming the 90 days trading horizon ZhongAn Online P is expected to under-perform the Vulcan Materials. In addition to that, ZhongAn Online is 2.52 times more volatile than Vulcan Materials. It trades about -0.54 of its total potential returns per unit of risk. Vulcan Materials is currently generating about -0.43 per unit of volatility. If you would invest  26,400  in Vulcan Materials on October 8, 2024 and sell it today you would lose (1,600) from holding Vulcan Materials or give up 6.06% of portfolio value over 90 days.

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

ZhongAn Online P  vs.  Vulcan Materials

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Vulcan Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZhongAn Online and Vulcan Materials

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

The idea behind ZhongAn Online P and Vulcan Materials 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.