Correlation Between Zhejiang Tailin and Hunan Nanling

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

By analyzing existing cross correlation between Zhejiang Tailin Bioengineering and Hunan Nanling Industrial, you can compare the effects of market volatilities on Zhejiang Tailin and Hunan Nanling 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 Zhejiang Tailin with a short position of Hunan Nanling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Tailin and Hunan Nanling.

Diversification Opportunities for Zhejiang Tailin and Hunan Nanling

0.58

Correlation Coefficient

Zhejiang Tailin  Hunan Nanling

Very weak diversification

The 3 months correlation between Zhejiang and Hunan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Tailin Bioengineering and Hunan Nanling Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Nanling Industrial and Zhejiang Tailin 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 Zhejiang Tailin Bioengineering are associated (or correlated) with Hunan Nanling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Nanling Industrial has no effect on the direction of Zhejiang Tailin i.e., Zhejiang Tailin and Hunan Nanling go up and down completely randomly.

Pair Corralation between Zhejiang Tailin and Hunan Nanling

Assuming the 90 days trading horizon Zhejiang Tailin Bioengineering is expected to under-perform the Hunan Nanling. In addition to that, Zhejiang Tailin is 1.53 times more volatile than Hunan Nanling Industrial. It trades about -0.02 of its total potential returns per unit of risk. Hunan Nanling Industrial is currently generating about 0.0 per unit of volatility. If you would invest  1,379  in Hunan Nanling Industrial on September 26, 2024 and sell it today you would lose (143.00) from holding Hunan Nanling Industrial or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Zhejiang Tailin Bioengineering  vs.  Hunan Nanling Industrial

Zhejiang Tailin Bioe

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Tailin Bioengineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Tailin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hunan Nanling Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Nanling Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Nanling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Tailin and Hunan Nanling

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

The idea behind Zhejiang Tailin Bioengineering and Hunan Nanling Industrial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.