Correlation Between Zhen Ding and Tradetool Auto

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

Diversification Opportunities for Zhen Ding and Tradetool Auto

0.38

Correlation Coefficient

Zhen Ding  Tradetool Auto

Weak diversification

The 3 months correlation between Zhen and Tradetool is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Zhen Ding Technology and Tradetool Auto Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradetool Auto 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 Tradetool Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradetool Auto has no effect on the direction of Zhen Ding i.e., Zhen Ding and Tradetool Auto go up and down completely randomly.

Pair Corralation between Zhen Ding and Tradetool Auto

Assuming the 90 days trading horizon Zhen Ding Technology is expected to under-perform the Tradetool Auto. But the stock apears to be less risky and, when comparing its historical volatility, Zhen Ding Technology is 1.94 times less risky than Tradetool Auto. The stock trades about -0.11 of its potential returns per unit of risk. The Tradetool Auto Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,560  in Tradetool Auto Co on December 23, 2024 and sell it today you would lose (90.00) from holding Tradetool Auto Co or give up 5.77% of portfolio value over 90 days.

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

Zhen Ding Technology  vs.  Tradetool Auto Co

Zhen Ding Technology

Risk-Adjusted Performance

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 latest abnormal 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.

Tradetool Auto

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Zhen Ding Technology and Tradetool Auto 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.