Correlation Between Zhonghong Pulin and Focus Media

Can any of the company-specific risk be diversified away by investing in both Zhonghong Pulin and Focus Media 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 Zhonghong Pulin and Focus Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhonghong Pulin Medical and Focus Media Information, you can compare the effects of market volatilities on Zhonghong Pulin and Focus Media 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 Zhonghong Pulin with a short position of Focus Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhonghong Pulin and Focus Media.

Diversification Opportunities for Zhonghong Pulin and Focus Media

0.62

Correlation Coefficient

Zhonghong Pulin  Focus Media

Poor diversification

The 3 months correlation between Zhonghong and Focus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zhonghong Pulin Medical and Focus Media Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Media Information and Zhonghong Pulin 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 Zhonghong Pulin Medical are associated (or correlated) with Focus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Media Information has no effect on the direction of Zhonghong Pulin i.e., Zhonghong Pulin and Focus Media go up and down completely randomly.

Pair Corralation between Zhonghong Pulin and Focus Media

Assuming the 90 days trading horizon Zhonghong Pulin is expected to generate 1.02 times less return on investment than Focus Media. In addition to that, Zhonghong Pulin is 1.56 times more volatile than Focus Media Information. It trades about 0.01 of its total potential returns per unit of risk. Focus Media Information is currently generating about 0.02 per unit of volatility. If you would invest  620.00  in Focus Media Information on September 28, 2024 and sell it today you would earn a total of  86.00  from holding Focus Media Information or generate 13.87% return on investment over 90 days.

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

Zhonghong Pulin Medical  vs.  Focus Media Information

Zhonghong Pulin Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Focus Media Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zhonghong Pulin and Focus Media

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

The idea behind Zhonghong Pulin Medical and Focus Media Information 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.