Correlation Between Delta Electronics and Zhen Ding

Can any of the company-specific risk be diversified away by investing in both Delta Electronics and Zhen Ding 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 Delta Electronics and Zhen Ding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delta Electronics and Zhen Ding Technology, you can compare the effects of market volatilities on Delta Electronics and Zhen Ding 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 Delta Electronics with a short position of Zhen Ding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Electronics and Zhen Ding.

Diversification Opportunities for Delta Electronics and Zhen Ding

0.53

Correlation Coefficient

Delta Electronics  Zhen Ding

Very weak diversification

The 3 months correlation between Delta and Zhen is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics and Zhen Ding Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhen Ding Technology and Delta Electronics 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 Delta Electronics are associated (or correlated) with Zhen Ding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhen Ding Technology has no effect on the direction of Delta Electronics i.e., Delta Electronics and Zhen Ding go up and down completely randomly.

Pair Corralation between Delta Electronics and Zhen Ding

Assuming the 90 days trading horizon Delta Electronics is expected to generate 1.05 times more return on investment than Zhen Ding. However, Delta Electronics is 1.05 times more volatile than Zhen Ding Technology. It trades about 0.04 of its potential returns per unit of risk. Zhen Ding Technology is currently generating about -0.04 per unit of risk. If you would invest  38,950  in Delta Electronics on October 22, 2024 and sell it today you would earn a total of  3,250  from holding Delta Electronics or generate 8.34% return on investment over 90 days.

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

Delta Electronics  vs.  Zhen Ding Technology

Delta Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Delta Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Zhen Ding Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhen Ding Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Zhen Ding 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 Delta Electronics and Zhen Ding

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

The idea behind Delta Electronics and Zhen Ding Technology 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.