Correlation Between Ma Kuang and Zhen Ding

Can any of the company-specific risk be diversified away by investing in both Ma Kuang and Zhen Ding 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 Ma Kuang and Zhen Ding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ma Kuang Healthcare and Zhen Ding Technology, you can compare the effects of market volatilities on Ma Kuang and Zhen Ding 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 Ma Kuang with a short position of Zhen Ding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ma Kuang and Zhen Ding.

Diversification Opportunities for Ma Kuang and Zhen Ding

-0.29

Correlation Coefficient

Ma Kuang  Zhen Ding

Very good diversification

The 3 months correlation between 4139 and Zhen is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and Zhen Ding Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhen Ding Technology and Ma Kuang 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 Ma Kuang Healthcare are associated (or correlated) with Zhen Ding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhen Ding Technology has no effect on the direction of Ma Kuang i.e., Ma Kuang and Zhen Ding go up and down completely randomly.

Pair Corralation between Ma Kuang and Zhen Ding

Assuming the 90 days trading horizon Ma Kuang Healthcare is expected to under-perform the Zhen Ding. In addition to that, Ma Kuang is 1.56 times more volatile than Zhen Ding Technology. It trades about -0.01 of its total potential returns per unit of risk. Zhen Ding Technology is currently generating about -0.01 per unit of volatility. If you would invest  11,900  in Zhen Ding Technology on September 15, 2024 and sell it today you would lose (200.00) from holding Zhen Ding Technology or give up 1.68% of portfolio value over 90 days.

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

Ma Kuang Healthcare  vs.  Zhen Ding Technology

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhen Ding Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhen Ding Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Zhen Ding 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 Ma Kuang and Zhen Ding

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

The idea behind Ma Kuang Healthcare and Zhen Ding Technology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.