Correlation Between Highwealth Construction and ZongTai Real

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

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

Diversification Opportunities for Highwealth Construction and ZongTai Real

0.37

Correlation Coefficient

Highwealth Construction  ZongTai Real

Weak diversification

The 3 months correlation between Highwealth and ZongTai is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Highwealth Construction Corp 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 Highwealth Construction 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 Highwealth Construction Corp 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 Highwealth Construction i.e., Highwealth Construction and ZongTai Real go up and down completely randomly.

Pair Corralation between Highwealth Construction and ZongTai Real

Assuming the 90 days trading horizon Highwealth Construction is expected to generate 2.43 times less return on investment than ZongTai Real. But when comparing it to its historical volatility, Highwealth Construction Corp is 1.24 times less risky than ZongTai Real. It trades about 0.11 of its potential returns per unit of risk. ZongTai Real Estate is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,305  in ZongTai Real Estate on December 25, 2024 and sell it today you would earn a total of  625.00  from holding ZongTai Real Estate or generate 18.91% return on investment over 90 days.

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

Highwealth Construction Corp  vs.  ZongTai Real Estate

Highwealth Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Highwealth Construction Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Highwealth Construction may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ZongTai Real Estate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ZongTai Real showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highwealth Construction and ZongTai Real

The main advantage of trading using opposite Highwealth Construction and ZongTai Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highwealth Construction 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 Highwealth Construction Corp 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.