Correlation Between Zero One and Chi Hua

Can any of the company-specific risk be diversified away by investing in both Zero One and Chi Hua 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 Zero One and Chi Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zero One Technology and Chi Hua Fitness, you can compare the effects of market volatilities on Zero One and Chi Hua 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 Zero One with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zero One and Chi Hua.

Diversification Opportunities for Zero One and Chi Hua

0.47

Correlation Coefficient

Zero One  Chi Hua

Very weak diversification

The 3 months correlation between Zero and Chi is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zero One Technology and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Zero One 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 Zero One Technology are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Zero One i.e., Zero One and Chi Hua go up and down completely randomly.

Pair Corralation between Zero One and Chi Hua

Assuming the 90 days trading horizon Zero One Technology is expected to generate 3.38 times more return on investment than Chi Hua. However, Zero One is 3.38 times more volatile than Chi Hua Fitness. It trades about 0.03 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about 0.09 per unit of risk. If you would invest  13,750  in Zero One Technology on December 21, 2024 and sell it today you would earn a total of  450.00  from holding Zero One Technology or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

Zero One Technology  vs.  Chi Hua Fitness

Zero One Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zero One Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Zero One is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chi Hua Fitness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Hua Fitness are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chi Hua is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Zero One and Chi Hua

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

The idea behind Zero One Technology and Chi Hua Fitness 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.