Correlation Between Feng Ching and ZongTai Real

Can any of the company-specific risk be diversified away by investing in both Feng Ching and ZongTai Real 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 Feng Ching and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Feng Ching Metal and ZongTai Real Estate, you can compare the effects of market volatilities on Feng Ching and ZongTai Real 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 Feng Ching with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Ching and ZongTai Real.

Diversification Opportunities for Feng Ching and ZongTai Real

-0.4

Correlation Coefficient

Feng Ching  ZongTai Real

Very good diversification

The 3 months correlation between Feng and ZongTai is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Feng Ching Metal and ZongTai Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZongTai Real Estate and Feng Ching 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 Feng Ching Metal are associated (or correlated) with ZongTai Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZongTai Real Estate has no effect on the direction of Feng Ching i.e., Feng Ching and ZongTai Real go up and down completely randomly.

Pair Corralation between Feng Ching and ZongTai Real

Assuming the 90 days trading horizon Feng Ching Metal is expected to under-perform the ZongTai Real. In addition to that, Feng Ching is 1.26 times more volatile than ZongTai Real Estate. It trades about -0.22 of its total potential returns per unit of risk. ZongTai Real Estate is currently generating about 0.08 per unit of volatility. If you would invest  3,085  in ZongTai Real Estate on October 10, 2024 and sell it today you would earn a total of  240.00  from holding ZongTai Real Estate or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Feng Ching Metal  vs.  ZongTai Real Estate

Feng Ching Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

ZongTai Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ZongTai Real may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Feng Ching and ZongTai Real

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

The idea behind Feng Ching Metal and ZongTai Real Estate 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.