Correlation Between Holy Stone and Zhen Ding

Can any of the company-specific risk be diversified away by investing in both Holy Stone and Zhen Ding 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 Holy Stone and Zhen Ding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holy Stone Enterprise and Zhen Ding Technology, you can compare the effects of market volatilities on Holy Stone and Zhen Ding 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 Holy Stone with a short position of Zhen Ding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and Zhen Ding.

Diversification Opportunities for Holy Stone and Zhen Ding

-0.68

Correlation Coefficient

Holy Stone  Zhen Ding

Excellent diversification

The 3 months correlation between Holy and Zhen is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Zhen Ding Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhen Ding Technology and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with Zhen Ding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhen Ding Technology has no effect on the direction of Holy Stone i.e., Holy Stone and Zhen Ding go up and down completely randomly.

Pair Corralation between Holy Stone and Zhen Ding

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to generate 0.6 times more return on investment than Zhen Ding. However, Holy Stone Enterprise is 1.68 times less risky than Zhen Ding. It trades about 0.2 of its potential returns per unit of risk. Zhen Ding Technology is currently generating about -0.11 per unit of risk. If you would invest  8,470  in Holy Stone Enterprise on December 20, 2024 and sell it today you would earn a total of  890.00  from holding Holy Stone Enterprise or generate 10.51% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  Zhen Ding Technology

Holy Stone Enterprise

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Holy Stone Enterprise are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Holy Stone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Zhen Ding Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhen Ding Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Holy Stone and Zhen Ding

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

The idea behind Holy Stone Enterprise and Zhen Ding Technology 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.