Correlation Between ZongTai Real and Excellence Optoelectronic

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

Diversification Opportunities for ZongTai Real and Excellence Optoelectronic

0.22

Correlation Coefficient

ZongTai Real  Excellence Optoelectronic

Modest diversification

The 3 months correlation between ZongTai and Excellence is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of ZongTai Real i.e., ZongTai Real and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between ZongTai Real and Excellence Optoelectronic

Assuming the 90 days trading horizon ZongTai Real Estate is expected to generate 0.53 times more return on investment than Excellence Optoelectronic. However, ZongTai Real Estate is 1.88 times less risky than Excellence Optoelectronic. It trades about 0.06 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about -0.04 per unit of risk. If you would invest  3,175  in ZongTai Real Estate on October 6, 2024 and sell it today you would earn a total of  125.00  from holding ZongTai Real Estate or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

ZongTai Real Estate  vs.  Excellence Optoelectronic

ZongTai Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Excellence Optoelectronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excellence Optoelectronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 ZongTai Real and Excellence Optoelectronic

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

The idea behind ZongTai Real Estate and Excellence Optoelectronic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.