Correlation Between Zhen Ding and Advantech

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

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

Diversification Opportunities for Zhen Ding and Advantech

0.44

Correlation Coefficient

Zhen Ding  Advantech

Very weak diversification

The 3 months correlation between Zhen and Advantech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zhen Ding Technology and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and Zhen Ding 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 Zhen Ding Technology are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Zhen Ding i.e., Zhen Ding and Advantech go up and down completely randomly.

Pair Corralation between Zhen Ding and Advantech

Assuming the 90 days trading horizon Zhen Ding is expected to generate 2.12 times less return on investment than Advantech. In addition to that, Zhen Ding is 1.09 times more volatile than Advantech Co. It trades about 0.13 of its total potential returns per unit of risk. Advantech Co is currently generating about 0.31 per unit of volatility. If you would invest  32,200  in Advantech Co on September 5, 2024 and sell it today you would earn a total of  4,000  from holding Advantech Co or generate 12.42% return on investment over 90 days.

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

Zhen Ding Technology  vs.  Advantech Co

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.

Advantech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhen Ding and Advantech

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

The idea behind Zhen Ding Technology and Advantech 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.