Correlation Between SI TECH and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both SI TECH and Zhengzhou Coal 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 SI TECH and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SI TECH and Zhengzhou Coal

0.83

Correlation Coefficient

SI TECH  Zhengzhou Coal

Very poor diversification

The 3 months correlation between 300608 and Zhengzhou is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SI TECH Information Technology and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and SI TECH 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 SI TECH Information Technology are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of SI TECH i.e., SI TECH and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between SI TECH and Zhengzhou Coal

Assuming the 90 days trading horizon SI TECH Information Technology is expected to under-perform the Zhengzhou Coal. In addition to that, SI TECH is 2.95 times more volatile than Zhengzhou Coal Mining. It trades about -0.01 of its total potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.06 per unit of volatility. If you would invest  1,257  in Zhengzhou Coal Mining on September 21, 2024 and sell it today you would earn a total of  42.00  from holding Zhengzhou Coal Mining or generate 3.34% return on investment over 90 days.

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

SI TECH Information Technology  vs.  Zhengzhou Coal Mining

SI TECH Information

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SI TECH Information Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SI TECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhengzhou Coal Mining

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with SI TECH and Zhengzhou Coal

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

The idea behind SI TECH Information Technology and Zhengzhou Coal Mining 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.