Correlation Between Ziel Home and Shenzhen Clou

Can any of the company-specific risk be diversified away by investing in both Ziel Home and Shenzhen Clou 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 Ziel Home and Shenzhen Clou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ziel Home Furnishing and Shenzhen Clou Electronics, you can compare the effects of market volatilities on Ziel Home and Shenzhen Clou 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 Ziel Home with a short position of Shenzhen Clou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ziel Home and Shenzhen Clou.

Diversification Opportunities for Ziel Home and Shenzhen Clou

0.81

Correlation Coefficient

Ziel Home  Shenzhen Clou

Very poor diversification

The 3 months correlation between Ziel and Shenzhen is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ziel Home Furnishing and Shenzhen Clou Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Clou Electronics and Ziel Home 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 Ziel Home Furnishing are associated (or correlated) with Shenzhen Clou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Clou Electronics has no effect on the direction of Ziel Home i.e., Ziel Home and Shenzhen Clou go up and down completely randomly.

Pair Corralation between Ziel Home and Shenzhen Clou

Assuming the 90 days trading horizon Ziel Home Furnishing is expected to generate 1.22 times more return on investment than Shenzhen Clou. However, Ziel Home is 1.22 times more volatile than Shenzhen Clou Electronics. It trades about 0.0 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.04 per unit of risk. If you would invest  2,405  in Ziel Home Furnishing on October 4, 2024 and sell it today you would lose (493.00) from holding Ziel Home Furnishing or give up 20.5% of portfolio value over 90 days.

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

Ziel Home Furnishing  vs.  Shenzhen Clou Electronics

Ziel Home Furnishing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ziel Home Furnishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Clou Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ziel Home and Shenzhen Clou

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

The idea behind Ziel Home Furnishing and Shenzhen Clou Electronics 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.