Correlation Between Central Reinsurance and ZongTai Real

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Can any of the company-specific risk be diversified away by investing in both Central Reinsurance 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 Central Reinsurance and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Reinsurance Corp and ZongTai Real Estate, you can compare the effects of market volatilities on Central Reinsurance 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 Central Reinsurance with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Reinsurance and ZongTai Real.

Diversification Opportunities for Central Reinsurance and ZongTai Real

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Central and ZongTai is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Central Reinsurance 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 Central Reinsurance 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 Central Reinsurance 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 Central Reinsurance i.e., Central Reinsurance and ZongTai Real go up and down completely randomly.

Pair Corralation between Central Reinsurance and ZongTai Real

Assuming the 90 days trading horizon Central Reinsurance Corp is expected to under-perform the ZongTai Real. But the stock apears to be less risky and, when comparing its historical volatility, Central Reinsurance Corp is 2.1 times less risky than ZongTai Real. The stock trades about -0.11 of its potential returns per unit of risk. The ZongTai Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,105  in ZongTai Real Estate on October 24, 2024 and sell it today you would earn a total of  60.00  from holding ZongTai Real Estate or generate 1.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Central Reinsurance Corp  vs.  ZongTai Real Estate

 Performance 
       Timeline  
Central Reinsurance Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Central Reinsurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Central Reinsurance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
ZongTai Real Estate 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Central Reinsurance and ZongTai Real Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Central Reinsurance and ZongTai Real

The main advantage of trading using opposite Central Reinsurance and ZongTai Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Reinsurance 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 Central Reinsurance 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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