Correlation Between Malion New and ZJBC Information

Can any of the company-specific risk be diversified away by investing in both Malion New and ZJBC Information 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 Malion New and ZJBC Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malion New Materials and ZJBC Information Technology, you can compare the effects of market volatilities on Malion New and ZJBC Information 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 Malion New with a short position of ZJBC Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malion New and ZJBC Information.

Diversification Opportunities for Malion New and ZJBC Information

0.7

Correlation Coefficient

Malion New  ZJBC Information

Poor diversification

The 3 months correlation between Malion and ZJBC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Malion New Materials and ZJBC Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZJBC Information Tec and Malion New 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 Malion New Materials are associated (or correlated) with ZJBC Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZJBC Information Tec has no effect on the direction of Malion New i.e., Malion New and ZJBC Information go up and down completely randomly.

Pair Corralation between Malion New and ZJBC Information

Assuming the 90 days trading horizon Malion New is expected to generate 1.57 times less return on investment than ZJBC Information. In addition to that, Malion New is 1.31 times more volatile than ZJBC Information Technology. It trades about 0.05 of its total potential returns per unit of risk. ZJBC Information Technology is currently generating about 0.1 per unit of volatility. If you would invest  202.00  in ZJBC Information Technology on October 23, 2024 and sell it today you would earn a total of  38.00  from holding ZJBC Information Technology or generate 18.81% return on investment over 90 days.

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

Malion New Materials  vs.  ZJBC Information Technology

Malion New Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malion New Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Malion New sustained solid returns over the last few months and may actually be approaching a breakup point.

ZJBC Information Tec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Malion New and ZJBC Information

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

The idea behind Malion New Materials and ZJBC Information 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.