Correlation Between Hangzhou Guotai and Zhengping RoadBridge

Can any of the company-specific risk be diversified away by investing in both Hangzhou Guotai and Zhengping RoadBridge 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 Hangzhou Guotai and Zhengping RoadBridge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hangzhou Guotai Environmental and Zhengping RoadBridge Constr, you can compare the effects of market volatilities on Hangzhou Guotai and Zhengping RoadBridge 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 Hangzhou Guotai with a short position of Zhengping RoadBridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Guotai and Zhengping RoadBridge.

Diversification Opportunities for Hangzhou Guotai and Zhengping RoadBridge

-0.19

Correlation Coefficient

Hangzhou Guotai  Zhengping RoadBridge

Good diversification

The 3 months correlation between Hangzhou and Zhengping is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Guotai Environmental and Zhengping RoadBridge Constr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengping RoadBridge and Hangzhou Guotai 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 Hangzhou Guotai Environmental are associated (or correlated) with Zhengping RoadBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengping RoadBridge has no effect on the direction of Hangzhou Guotai i.e., Hangzhou Guotai and Zhengping RoadBridge go up and down completely randomly.

Pair Corralation between Hangzhou Guotai and Zhengping RoadBridge

Assuming the 90 days trading horizon Hangzhou Guotai is expected to generate 1.15 times less return on investment than Zhengping RoadBridge. But when comparing it to its historical volatility, Hangzhou Guotai Environmental is 1.94 times less risky than Zhengping RoadBridge. It trades about 0.08 of its potential returns per unit of risk. Zhengping RoadBridge Constr is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Zhengping RoadBridge Constr on December 26, 2024 and sell it today you would earn a total of  21.00  from holding Zhengping RoadBridge Constr or generate 5.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Hangzhou Guotai Environmental  vs.  Zhengping RoadBridge Constr

Hangzhou Guotai Envi

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Guotai Environmental are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Guotai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zhengping RoadBridge

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Hangzhou Guotai and Zhengping RoadBridge

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

The idea behind Hangzhou Guotai Environmental and Zhengping RoadBridge Constr 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.