Correlation Between King Strong and Zhejiang Daily

Can any of the company-specific risk be diversified away by investing in both King Strong and Zhejiang Daily 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 King Strong and Zhejiang Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Strong New Material and Zhejiang Daily Media, you can compare the effects of market volatilities on King Strong and Zhejiang Daily 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 King Strong with a short position of Zhejiang Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Zhejiang Daily.

Diversification Opportunities for King Strong and Zhejiang Daily

0.9

Correlation Coefficient

King Strong  Zhejiang Daily

Almost no diversification

The 3 months correlation between King and Zhejiang is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media and King Strong 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 King Strong New Material are associated (or correlated) with Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of King Strong i.e., King Strong and Zhejiang Daily go up and down completely randomly.

Pair Corralation between King Strong and Zhejiang Daily

Assuming the 90 days trading horizon King Strong is expected to generate 1.29 times less return on investment than Zhejiang Daily. But when comparing it to its historical volatility, King Strong New Material is 1.09 times less risky than Zhejiang Daily. It trades about 0.03 of its potential returns per unit of risk. Zhejiang Daily Media is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Zhejiang Daily Media on October 4, 2024 and sell it today you would earn a total of  215.00  from holding Zhejiang Daily Media or generate 25.87% return on investment over 90 days.

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

King Strong New Material  vs.  Zhejiang Daily Media

King Strong New

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, King Strong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhejiang Daily Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Daily Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Daily is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with King Strong and Zhejiang Daily

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

The idea behind King Strong New Material and Zhejiang Daily Media 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.