Correlation Between ZongTai Real and Globaltek Fabrication

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

Diversification Opportunities for ZongTai Real and Globaltek Fabrication

0.29

Correlation Coefficient

ZongTai Real  Globaltek Fabrication

Modest diversification

The 3 months correlation between ZongTai and Globaltek is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication 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 Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of ZongTai Real i.e., ZongTai Real and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between ZongTai Real and Globaltek Fabrication

Assuming the 90 days trading horizon ZongTai Real Estate is expected to generate 0.6 times more return on investment than Globaltek Fabrication. However, ZongTai Real Estate is 1.66 times less risky than Globaltek Fabrication. It trades about 0.2 of its potential returns per unit of risk. Globaltek Fabrication Co is currently generating about -0.02 per unit of risk. If you would invest  3,305  in ZongTai Real Estate on December 26, 2024 and sell it today you would earn a total of  585.00  from holding ZongTai Real Estate or generate 17.7% return on investment over 90 days.

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

ZongTai Real Estate  vs.  Globaltek Fabrication Co

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 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ZongTai Real showed solid returns over the last few months and may actually be approaching a breakup point.

Globaltek Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Globaltek Fabrication 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 Globaltek Fabrication

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

The idea behind ZongTai Real Estate and Globaltek Fabrication 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.