Correlation Between ZongTai Real and Newretail

Can any of the company-specific risk be diversified away by investing in both ZongTai Real and Newretail 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 Newretail 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 Newretail Co, you can compare the effects of market volatilities on ZongTai Real and Newretail 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 Newretail. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZongTai Real and Newretail.

Diversification Opportunities for ZongTai Real and Newretail

0.39

Correlation Coefficient

ZongTai Real  Newretail

Weak diversification

The 3 months correlation between ZongTai and Newretail is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail 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 Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of ZongTai Real i.e., ZongTai Real and Newretail go up and down completely randomly.

Pair Corralation between ZongTai Real and Newretail

Assuming the 90 days trading horizon ZongTai Real is expected to generate 13.07 times less return on investment than Newretail. But when comparing it to its historical volatility, ZongTai Real Estate is 2.57 times less risky than Newretail. It trades about 0.02 of its potential returns per unit of risk. Newretail Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Newretail Co on October 21, 2024 and sell it today you would earn a total of  1,520  from holding Newretail Co or generate 138.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.65%
Values	Daily Returns

ZongTai Real Estate  vs.  Newretail Co

ZongTai Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZongTai Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Newretail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZongTai Real and Newretail

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

The idea behind ZongTai Real Estate and Newretail Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.