Correlation Between ZongTai Real and HUA YU

Can any of the company-specific risk be diversified away by investing in both ZongTai Real and HUA YU 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 ZongTai Real and HUA YU into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZongTai Real Estate and HUA YU LIEN, you can compare the effects of market volatilities on ZongTai Real and HUA YU 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 ZongTai Real with a short position of HUA YU. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZongTai Real and HUA YU.

Diversification Opportunities for ZongTai Real and HUA YU

0.51

Correlation Coefficient

ZongTai Real  HUA YU

Very weak diversification

The 3 months correlation between ZongTai and HUA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and HUA YU LIEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUA YU LIEN and ZongTai Real 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 ZongTai Real Estate are associated (or correlated) with HUA YU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUA YU LIEN has no effect on the direction of ZongTai Real i.e., ZongTai Real and HUA YU go up and down completely randomly.

Pair Corralation between ZongTai Real and HUA YU

Assuming the 90 days trading horizon ZongTai Real Estate is expected to generate 0.85 times more return on investment than HUA YU. However, ZongTai Real Estate is 1.17 times less risky than HUA YU. It trades about 0.18 of its potential returns per unit of risk. HUA YU LIEN is currently generating about 0.04 per unit of risk. If you would invest  3,380  in ZongTai Real Estate on December 30, 2024 and sell it today you would earn a total of  570.00  from holding ZongTai Real Estate or generate 16.86% return on investment over 90 days.

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

ZongTai Real Estate  vs.  HUA YU LIEN

ZongTai Real Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ZongTai Real showed solid returns over the last few months and may actually be approaching a breakup point.

HUA YU LIEN

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUA YU LIEN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HUA YU is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ZongTai Real and HUA YU

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

The idea behind ZongTai Real Estate and HUA YU LIEN 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.