Correlation Between STL Technology and Zhen Ding

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

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

Diversification Opportunities for STL Technology and Zhen Ding

0.42

Correlation Coefficient

STL Technology  Zhen Ding

Very weak diversification

The 3 months correlation between STL and Zhen is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co 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 STL Technology 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 STL Technology Co 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 STL Technology i.e., STL Technology and Zhen Ding go up and down completely randomly.

Pair Corralation between STL Technology and Zhen Ding

Assuming the 90 days trading horizon STL Technology Co is expected to generate 2.75 times more return on investment than Zhen Ding. However, STL Technology is 2.75 times more volatile than Zhen Ding Technology. It trades about 0.2 of its potential returns per unit of risk. Zhen Ding Technology is currently generating about -0.01 per unit of risk. If you would invest  3,490  in STL Technology Co on September 15, 2024 and sell it today you would earn a total of  2,260  from holding STL Technology Co or generate 64.76% return on investment over 90 days.

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

STL Technology Co  vs.  Zhen Ding Technology

STL Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

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 STL Technology and Zhen Ding

The main advantage of trading using opposite STL Technology and Zhen Ding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STL Technology 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 STL Technology Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.