Correlation Between Guangdong Jinma and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both Guangdong Jinma and Zoomlion Heavy 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 Guangdong Jinma and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Jinma Entertainment and Zoomlion Heavy Industry, you can compare the effects of market volatilities on Guangdong Jinma and Zoomlion Heavy 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 Guangdong Jinma with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jinma and Zoomlion Heavy.

Diversification Opportunities for Guangdong Jinma and Zoomlion Heavy

0.22

Correlation Coefficient

Guangdong Jinma  Zoomlion Heavy

Modest diversification

The 3 months correlation between Guangdong and Zoomlion is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jinma Entertainment and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and Guangdong Jinma 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 Guangdong Jinma Entertainment are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of Guangdong Jinma i.e., Guangdong Jinma and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between Guangdong Jinma and Zoomlion Heavy

Assuming the 90 days trading horizon Guangdong Jinma Entertainment is expected to under-perform the Zoomlion Heavy. In addition to that, Guangdong Jinma is 2.02 times more volatile than Zoomlion Heavy Industry. It trades about -0.21 of its total potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about -0.1 per unit of volatility. If you would invest  716.00  in Zoomlion Heavy Industry on October 11, 2024 and sell it today you would lose (22.00) from holding Zoomlion Heavy Industry or give up 3.07% of portfolio value over 90 days.

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

Guangdong Jinma Entertainment  vs.  Zoomlion Heavy Industry

Guangdong Jinma Ente

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jinma Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jinma sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoomlion Heavy Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guangdong Jinma and Zoomlion Heavy

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

The idea behind Guangdong Jinma Entertainment and Zoomlion Heavy Industry 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.